New Premier Liz Truss outlines her plan to deal with soaring energy bills facing households and businesses.
At its core is a move to limit the 80% increase in domestic bills designated for the month of October.
Here’s what it means for you
How much will I pay?
You will still pay for the gas and electricity you use. But the government’s energy price guarantee will limit the price suppliers can charge per unit of energy.
For a typical household – one that uses 12,000 kWh (kilowatt hours) of gas and 2,900 kWh of electricity per year – this means that the annual bill from October will be no more than £2,500. Without this intervention, the annual bill would have been £3,549 per year. Last winter it was £ 1,277 per year.
However, if you use more gas or electricity, you will pay more.
The guarantee will last for two years.
To be precise, the average unit price for dual fuel customers paying by direct debit will be limited to 34.0 pence per kilowatt hour (kWh) for electricity and 10.3 pence per kWh for gas.
Standing charges will remain on track for a small increase in October.
Will I have to pay the discount back?
Not directly on your bill or taxes. However, the government is paying for this by borrowing money. This adds to its national debt. The Prime Minister said the cost will be outlined later this month.
In time, this could be paid for through taxes, but for now the government will borrow money on the international market and pay a premium for it.
The so-called “green levy” will be removed from the bill and paid for again through tax borrowing.
Will I still get cost-of-living payments?
Yes, these could reach hundreds of pounds this winter.
So far, the first installment of £326 has been paid to low-income families for certain benefits and tax credits.
There is also a £400 discount on the winter bill for all families.
Under current plans, these payments will be made this winter only, and the cap will last for two years. As a result, households will effectively pay more next winter.
Caps do not cover Northern Ireland. What happens to those household bills?
The government says it will provide the same level of support to families in Northern Ireland as it does in the rest of the UK.
However, this will require legislation.
I use heating oil, what about me?
The prime minister said a fund would be set up to support those not covered by the cap, but she did not specify how large it would be.
That includes people who use heating oil in their homes, people with public heating plans and people in mobile home parks who pay the park owner rather than the provider.
More details will be announced later, but it will be an extremely complex task.
People in park homes, for example, don’t yet know how they will receive the £400 discount available to everyone – which was announced a few months ago.
The government has not yet said how big the fund will be or how long it will take to organize.
I have a fixed deal – can I get out of it?
Fixed trades allow you to pay for energy at a set rate for a set period of time, but you are locked in.
Given the prospect of rising energy prices, many of you whose fixed deals have expired in recent months may have considered fixing your deal again.
It’s an extremely expensive option, but given the eye-popping projections of soaring bills, it’s understandable that some people have chosen to adopt it.
The prime minister did not mention fixed deals in his statement. Since then, however, the government has said that fixed-rate deals above the price cap will be automatically discounted to 17 pence per kilowatt hour for electricity and 4.2 pence per kilowatt hour for gas in early October.
This equates to a reduction of around £1,000 for households using typical energy sources. However, it means that people on fixed rates could still pay more per unit than the price cap – if their fix costs are much higher.
There is no automatic right to cancel a fixed deal without penalty unless you fix it within the last 14 days. Individuals may need to negotiate with their provider.
What support is there for small businesses?
Businesses will receive support with a six-month bill cap, a shorter period of protection than many would like.
This support will focus on businesses dealing with variable transactions or contracts that are about to expire.