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What will an Energy Price Cap do for your bills?
PM Liz Truss announced an energy price cap as part of her government’s response to the Cost of Living Crisis. This new ‘Energy Price Guarantee’ means that the feared 80% increase in energy bills will be limited for UK households. But, for most, the cost of heating will go up. With inflation still rising and worries about the economy persisting, how will the energy price cap help and will it be enough?
What is the Energy Price Cap?
The Energy Price Guarantee is in place to set the maximum amount that suppliers are allowed to charge homes for their gas and electricity. It will take effect over the current energy cap, and it will prevent the average household from seeing an annual bill above £2,500 (up from £1,9711).
However, these caps only limit the amount that can be charged per unit of energy. This means that if your home uses more than the yearly average of 12,000 kWh2 of gas and 2,900 kWh3 of electricity, your energy bills will be above £2,500. If you live in a smaller property, such as a flat or a terrace house, your energy costs should be below this limit. Semi-detached homes will likely be slightly above average, and detached properties are likely to have annual bills above £3,000.
How much will this help with my energy bills?
Considering that last winter’s energy cap was £1,2774 annually, the long-awaited Energy Price Guarantee has left many households remaining concerned with the rising cost of living. At the very least, this action will prevent energy bills from climbing as high as initially feared (£3,549 a year). Additionally, some other guarantees regarding the Cost of Heating have been made including:
This new energy cap will not increase for 6 months
The support applies to all households using mains gas and electricity in England, Scotland, and Wales
Households in Northern Ireland, and those using alternatives to mains energy such as oil or LPG, will have comparable support options available to them
The one-off £400 energy bill discount has been kept, as has the extra support for low-income households
Who will pay for the energy cap?
Estimates suggest the scheme will cost as much as £150 billion. However, since the new government has u-turned on the Windfall Tax Plan, it looks as if it will ultimately be paid by the taxpayer.
Moreover, some have criticised the plan for not going far enough to support everyone. Planned tax cuts have led some thinktanks to claim that support for wealthy households is double that of low-income families5. And, with many questions still to be answered over support for businesses at this time, the Energy Price Guarantee still has unresolved issues as we get Closer to Winter.
How can smart heating help?
Energy bills this winter will be higher, but there are some ways your household can limit the impact. Smart Heating Controls are one of the most effective ways to Reduce your Energy Usage, which is what the price cap will be measured on. You can discover how Wiser’s Cost-Effective Controls Work Here for more information.
Alternatively, to read more on energy savings, check out our 10 Ways to Reduce Your Energy Consumption Here.
What's next?
The Autumn statement will be delivered aiming to restore stability to the UK Economy.