MSE News

Government changes how the Energy Price Guarantee should be applied to Economy 7 tariffs

The Government has changed its guidance on how energy suppliers should apply the Energy Price Guarantee (EPG) discount to Economy 7 tariffs from April. It comes after founder Martin Lewis raised the issue with the Energy Secretary, as many Economy 7 users saw bills rise unfairly in January.

Economy 7 households saw an average 7% rise in energy bills in January, following changes to the Energy Price Cap and the subsequent rate changes under the EPG – despite the intention of the scheme to keep bills at the same level over winter. Those on single-rate tariffs had only trivial changes, ranging between 0.8% and 1.4% on average, depending on how you pay.

In an effort to make its EPG scheme fairer, the Government has now changed its guidance on how suppliers should apply the discount to Economy 7 tariffs.

If you're on Economy 7, our Is Economy 7 worth it? guide can help you check it's right for you and how to get the most out of it if it is.

How is the EPG guidance changing?

Currently, providers have the flexibility to decide how to apply the EPG discount to the day and night rates under an Economy 7 tariff, but from April, they'll be expected to apply it equally to both rates – meaning, where possible, both the day and night rates will get the full 16.6 pence per kilowatt hour discount.

In March, Martin raised this issue with Energy Secretary Grant Shapps on his ITV1 show, who promised to look into the impact of the Energy Price Cap and EPG on Economy 7 users to ensure it's fairer. Now the Government has confirmed the changes.

Martin: 'This looks to be a fairer system'

MSE founder Martin Lewis

Martin said: "This is something I raised with the Secretary of State when he came on my ITV show, and he acknowledged at the time the issue – so it's good to see they are listening. This looks to be a fairer system. At the last Price Cap change, many on Eco 7 and similar tariffs saw a large increase even though those on standard deals didn't.  Though of course, we wait to see how it plays out in practice."

Why did Economy 7 prices rise in January?

Energy prices changed slightly for everyone in January due to the way regulator Ofgem sets the Energy Price Cap, which rose by an average 20% on 1 January 2023. It changes every three months and underpins the EPG, which provides a discount on those rates, bringing typical dual-fuel bills down to £2,500 a year until July 2023, with the Government offsetting the difference.

However, the EPG is a flat discount on the rates set by the Price Cap – but Ofgem's cap varies considerably depending on which region you're in, how you pay and whether you're on a time-of-use tariff, so all households saw varying changes to the rates they pay.

But in January, due to the fact that Economy 7 customers got exactly the same level of discount as all other energy customers, despite Ofgem increasing the underlying rates for Economy 7 much more than standard meters, overall prices increased more. Martin explained the issue at the time:

See how Economy 7 prices are capped and our Energy Price Guarantee need-to-knows for full info.

What you should be doing now to help yourself

There are no meaningfully cheaper open-market tariffs available, so most can't switch and save right now. Yet there are three areas to focus on...

  • Providers' day and night rates vary massively – check which one's best for you based on your usage. Depending on how much electricity you use in the day or at night, certain suppliers could be better than others, so check which is best for you.

  • Try to cut your energy usage. There are lots of ways to easily reduce what you use. Check our 60+ energy savers checklist for pain-free changes, such as turning down your thermostat or tweaking your boiler's flow temperature. Also, see our Heat the human not the home and Energy mythbusters guides for more tips.

  • Have you got all the help you qualify for? First check you've got the £400 help all households are eligible for – important as some on prepay meters haven't claimed theirs. Plus if you can't pay, check out Struggling to pay – energy help to see if there are any grants.

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