Jeremy Hunt announced the Energy Price Guarantee will not be cut.
The reversal in the planned support cut comes ahead of the spring budget and a forthcoming price hike next month.
In his autumn statement in the House of Commons in November 2022, the Chancellor outlined his vision for what he called Vladimir Putin’s “energy independence” and “efficiency”.
Mr Hunt said the energy price guarantee would rise, meaning higher bills for millions of people – but the Treasury Department has now confirmed the current April to June level will be extended by a further three months.
But with prices skyrocketing everywhere due to the rise in the cost of living, what exactly is the cap – and by how much does the guarantee change?
Here we explain the energy price cap and guarantee – and why it all happens.
How much will my electricity bills increase?
Ofgem’s energy price cap is currently £4,279/year and will decrease to £3,280 from 1 April.
However, since the energy price cap resulted in higher energy costs, the government stepped in and introduced them Energy price guarantee that offers a discount on the household price cap.
Currently, the energy price guarantee is set at £2,500, which Prime Minister Rishi Sunak says will last until June when “gas prices are expected to fall”.
“We know people are concerned that their bills will increase in April and to give them some peace of mind we are keeping the energy price guarantee at its current level until the summer when gas prices are expected to fall,” he said.
“Keeping energy costs low is part of our plan to help hard-working families with the cost of living and cut inflation in half this year.”
Originally, Mr Hunt announced that this cap would increase to £3,000 from April 2023.
Back in November, Mr Hunt said in the House of Commons: “This winter we will stick with the plan to spend £55billion to help households and businesses with their energy bills – one of the biggest support plans in Europe.
‘From April we will continue the energy price guarantee for a further 12 months at a higher level of £3,000 per year for the average household.’
Currently, the average unit price for dual-fuel customers paying by direct debit is 34p per kWh for electricity and 10.3p per kWh for gas, including VAT.
Before the Government announced the £2,500 energy price guarantee, the price was set to rise to 52p per kWh for electricity and 14p per kWh for gas.
What does Ofgem’s energy price cap mean?
The energy price cap is the maximum amount that consumers can be billed for a variable dual-fuel tariff for typical consumption of gas and electricity for a given period of time.
The cap is set by Ofgem – the government’s energy regulator – and applies if you have a standard energy tariff, whether you pay by direct debit, standard credit or prepayment meter.
However, the cap does not apply if you:
- Have a temporary energy tariff
- Have opted for a standard variable green electricity tariff which Ofgem has exempted from the cap.
If you don’t have a fixed tariff with an energy supplier for a certain period of time, it essentially means that your energy bill can only go up to the ceiling.
It is the unit prices that are capped. So if you use more energy, you pay more, as MoneySupermarket.com explains.
Ofgem previously estimated that 22 million households currently use variable tariffs, adding to that number around two million customers whose energy suppliers went bust in 2021.
The government has stepped in to freeze the energy price cap for two years – although previously the cap was on course to rise every three months instead of the usual six months.
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https://metro.co.uk/2023/03/15/what-is-the-upcoming-energy-price-cap-and-is-the-price-guarantee-rising-18444368/ What is the upcoming energy price cap and will the price guarantee increase?