Energy prices to rise by 20% from April as Government announces scaled back support for households from next spring
Chancellor Jeremy Hunt has today announced that the energy price guarantee (EPG), introduced in October to protect households from a hideous 80% increase in energy bills, will continue after April. However, the support available will be massively scaled back. Currently, a typical dual-fuel household pays £2,500/year under the EPG – from April, it'll be £3,000/year until 31 March 2024. We've full info on today's announcements below.
The EPG was introduced on 1 October 2022, capping the amount suppliers can charge for each unit of electricity and gas you use. It was initially due to last two years, but this was changed later in October, when the Chancellor said the support at its current level would only last until April. It has now been announced in the Autumn Statement that support for all will continue beyond April, but with the maximum amount suppliers can charge increasing by 20%.
In reality though, all households will actually see an even bigger rise to bills of 43% as the £400 payment all homes are getting this winter under the energy bill support scheme will not be extended.
While this is a steep rise, it would likely be even worse without the support. The latest predictions from analysts Cornwall Insight are for regulator Ofgem's price cap to increase to £3,740/year for a typical household from April – though the assessment period for that only started today – and will likely remain well above £3,000/year until at least the end of 2023. If things change and the price cap drops below £3,000/year, the EPG will also fall.
Alongside the EPG announcement, the Government has announced that many of the cost of living payments will continue next year. We've full info on the announcements below.
Watch Martin Lewis's instant Autumn Statement summary and analysis
A round-up of today's announcements
The Government announced a range of measures to support households with high energy bills over the next year – click on the links below to be taken to more info on each:
- The energy price guarantee will be extended by another year from April, but rising from £2,500/year to £3,000/year for a typical home (use more, and you'll pay more).
- The alternative fuel payment will be doubled (for those on heating oil, LPG and similar), increasing from £100 to £200 this winter.
- A one-off payment of £900 for those on certain means-tested benefits next year.
- A one-off £300 payment for pensioners next year.
- A one-off £150 payment for those on certain non means-tested disability benefits next year.
- The Household Support Fund will be extended by another year.
- A consultation on the future of the EPG, including whether it should be based on volumetric rates.
- Government to review 'social' energy tariffs.
For more info on all the help available this year, see our What to do if you're struggling to pay your energy bills guide.
The energy price guarantee caps the amount suppliers can charge for each unit of electricity and gas you use, as well as the standing charges – see what they are now in our EPG rates guide. It will remain at the current level of £2,500 a year for a typical household until 31 March 2023, before rising to £3,000 a year from 1 April 2023 until 31 March 2024. Equivalent support will continue to be provided in Northern Ireland.
But it's NOT an absolute cap, the headline £2,500 a year figure you see quoted is based on what a 'typical' household would pay over a year. If you use more than that, you pay more (use less, you'll pay less).
This 'typical' household is determined by Ofgem, and used as a way of comparing prices. It assume a certain level of usage – 12,000 kilowatt hours (kWh) of gas and 2,900 kWh of electricity.
Technically, the energy price guarantee has been calculated as a reduction to the previously planned unit rates under Ofgem's price cap methodology. The Government took these rates, and applied a discount of around 4p per kilowatt (p/kWh) on gas unit rates, and 17p/kWh on electricity unit rates (standing charges remained at Ofgem's planned level) from 1 October 2022.
We don't know what level of discount this will be in future, but it will likely change as Ofgem's underlying cap and the EPG itself changes over the the coming months.
Those on fixed deals also get unit rate reductions. Here, you get an 'up to' reduction of the same amount on the unit rates for gas and electricity, reducing the price of your fix, at a maximum, to the same level as the energy price guarantee for standard tariffs.
For more info on how the EPG works, see our Energy price guarantee need-to-knows.
The Chancellor announced today that the alternative fuel payment – for those that don't use mains gas, such as people with heating oil, LPG or biomass boilers – will double from £100 to £200. This is on top of the £400 energy bill support payment virtually all households get on their electricity.
All households in Northern Ireland will now get this payment. According to the Government, this in recognition of "the prevalence of alternative fuel usage in Northern Ireland".
The Government has said this money will come from your electricity supplier, and will be added to your energy account as bill credit, but it hasn't said when yet. It has also said that if you don't have a direct relationship with an electricity supplier, you'll still get the payment, though it has yet to announce how this will be paid.
It was also announced that the Government will provide households on means-tested benefits with an additional £900 cost of living payment next year. We don't have full info on this scheme yet, but it's likely to work similar to the £650 payment made available to households this year.
About eight million UK households getting any of the following are eligible:
- Child or working tax credits
- Income-based jobseeker's allowance
- Income-related employment and support allowance
- Income support
- Pension credit
- Universal credit
The £900 will be split into more than one instalment.
Pensioner households will get an additional £300 cost of living payment in 2023/2024. Again we don't have full info on this scheme yet, but will update this story when we know more.
This year, these households will be getting the £300 as a top-up to the winter fuel payment. While the Government hasn't confirmed this, it'll likely be the same for next year's payment.
About six million people across the UK on certain disability benefits (see the list below) will receive a one-off payment of £150 next year.
This includes everyone eligible for:
- Armed forces independence payment
- Attendance allowance
- Constant attendance allowance
- Disability living allowance
- Personal independence payment
- Scottish disability benefits
- War pension mobility supplement
We don't have full info on this scheme yet, but it's likely to work in a similar way to the £150 payment households received this year.
Under the Household Support Fund, councils in England have access to funding to help those most in need. A further £1 billion is being provided to extend this scheme for another year from April 2023.
For full info on the scheme, see Help for vulnerable households from councils.
It was announced that the Government intends to consult on amending the energy price guarantee scheme after April 2023 based on volumetric rates. This means paying a cheaper rate for the first amount of energy you use, and then if you start using a lot of energy, the rate you pay will go up.
The consultation will take into account the best ways to ensure that vulnerable high energy users, such as those with medical requirements, don't overpay.
The Government also said it will work with consumer groups and the industry to boost consumer protection from April 2024, including the option of introducing social tariffs in the energy market – something Martin has been calling for.