Energy Price Guarantee need-to-knows

Martin Lewis: What the Energy Price Cap drop means for you and the EPG

When the new Price Cap from 1 July was announced, Martin explained what it means for your bills and the future of the EPG. 

Energy Price Guarantee: 10 need-to-knows

Up until 30 June, the EPG controlled what most of us were paying for our gas and electricity. This all changed on 1 July, when the the Price Cap fell below the EPG, meaning the EPG will became irrelevant to most people's bills. Here's what you need to know.

1. From 1 July, the EPG ended for most, as the Price Cap fell below it

   Regulator Ofgem sets the Energy Price Cap every three months (setting a limit on what providers can charge per unit on their standard tariffs), but between October 2022 and June 2023 no one paid the full amount under the cap, due to the EPG discount.

   From July, this all changed, as the Cap is now below the level of the EPG, meaning that for most, the EPG will has fallen away and the Price Cap once again controls most people's rates – as we pay the lower of the two. 
   
   While falling prices is welcome news, the loss of the Government's £400 energy bill support scheme means most are still paying more than they did last winter.

   Energy Price Cap and Energy Price Guarantee changes

   Price Cap dates	Typical dual-fuel household direct debit bill under the Price Cap	Typical dual-fuel household direct debit bill under the Energy Price Guarantee
   1 October 2022 to 31 December 2022	£3,549/year	£2,500/year
   1 January 2023 to 31 March 2023	£4,279/year	£2,500/year
   THE PREVIOUS RATE 1 April 2023 to 30 June 2023	£3,280/year	£2,500/year
   THE CURRENT RATE 1 July 2023 to 30 September 2023	£2,074/year	£3,000/year
   1 October 2023 to 31 December 2023 Weak prediction (1)	£1,933/year	£3,000/year
   1 January 2024 to 31 March 2024 Weak prediction (1)	£1,944/year	£3,000/year

   (1) According to the latest prediction (on 13 June) from analysts at Cornwall Insight. (2) The prepay Price Cap is about 2% higher until 1 July, and for those who pay each month after getting a bill, 6% higher. That differential will likely continue for those who pay on receipt of a bill. Those on prepay will pay less from July. 

2. The Energy Price Guarantee is a Government subsidy that brought bills down to £2,500 a year last winter for a typical household

   On 1 October 2022, the Government introduced the Energy Price Guarantee (EPG) to reduce bills in England, Scotland and Wales amid soaring wholesale energy prices.

   It came after Martin and MSE had spent months raising the alarm over the energy bills catastrophe we could see coming that would have taken a typical bill to over £4,000. Martin's plea was for urgent intervention, so he welcomed the Energy Price Guarantee announcement.

   We've seen a lot of confusion, so let's start by saying there's NO MAXIMUM ENERGY BILL. The EPG (and Energy Price Cap) limits the amount households can be charged per unit of gas or electricity, as well as a cap on the daily standing charge (see rates below).

   It provided a set discount on Ofgem's Price Cap, and up until 30 June, it brought bills down to £2,500/year for a typical household paying by direct debit – but if you USE MORE, YOU PAY MORE; USE LESS, YOU PAY LESS. 

   It's more expensive if you prepay, or pay on receipt of bills

   The £2,500 a year annual bill is based on a typical household paying by direct debit. For those who pay on receipt of bills, or use a prepayment meter, the cap is slightly different. 

   Annual bill for a typical household

   Payment method	Energy Price Guarantee from 1 April to 30 June 2023
   Direct debit	£2,500
   Standard credit (on receipt of bill)	£2,702
   Prepayment	£2,545

   Based on Ofgem typical consumption values of 2,900kWh of electricity and 12,000kWh of gas each year.

   The fact payment in receipt of bills is higher is why those thinking of "ditching direct debit to just pay what I owe" should be careful. If that's you, check out Variable direct debits.

   And it's worth noting, that from 1 July, prepay customers will be pay no more than those who pay by direct debit.

3. The EPG was due to rise 20% in April – but this was postponed after our campaign

   On 1 April 2023, the EPG was set to rise by 20% on average, taking a typical bill under the EPG from £2,500/year to £3,000/year. But Chancellor Jeremy Hunt postponed the rise until July after 131 charities supported Martin and MSE's campaign.

   Instead, the EPG rose to £3,000/year in July – however, this increase won't have any impact on the majority of households' bills. That's because the Energy Price Cap will fall below the EPG, and households pay whichever is the lower of these two rates (more below).

4. It is actually a cap on standing charges and unit rates

   There is no actual total cap on bills - instead there are regional caps on the maximum standing charge and the unit rate firms can levy. Here are the average unit rates for dual-fuel customers under the current Energy Price Guarantee until 30 June, and the Energy Price Cap from 1 July until 30 September.

   For full regional rates under the current Price Cap and previous EPG rate (including for prepay and on receipt of a bill) see our Energy Price Cap unit rates guide.

   Average standing charges and unit rates for gas and electricity if paying by direct debit

   	New Energy Price Cap rates from 1 July to 30 September 2023	Current Energy Price Guarantee rates from 1 April to 30 June 2023
   Gas	Unit rate: 7.51p per kilowatt hour (kWh) Standing charge: 29.11p per day	Unit rate: 10.31p per kilowatt hour (kWh) Standing charge: 29.11p per day
   Electricity	Unit rate: 30.11p per kWh Standing charge: 52.97p per day	Unit rate: 33.21p per kWh Standing charge: 52.97p per day

   Rates and standing charges are averages, which vary by region. Assumes payment by direct debit and includes VAT (at 5%). For those who pay each month after getting a bill, it's typically 6 to 8% higher.

   On Eco 7, Eco 10 or other non-standard tariff? Firms should apply the discount equally across the day and night rates (around 16.6p/kWh for electric from April). We've got more info in our Is Economy 7 worth it? guide.

5. Prepay for energy? You'll still get a small discount on gas unit rates under the EPG from July

   In March, the Government said it would end the "prepayment penalty" from July, where those on prepay meters pay more for their energy than those paying by direct debit under the Price Cap and EPG. 

   The Government confirmed it would do this through the EPG – by providing an additional discount on the Price Cap rates for those on prepay, to bring down the rates, so you'd pay no more than those paying by direct debit. 

   So while the EPG has ended for most households, due to the Price Cap falling below the EPG rate set by Government, those on prepay are still getting a state-subsidised discount to end the prepay premium.

   Under the Price Cap, someone on typical use pays £2,077 a year from July – £3 more a year than someone paying by direct debit. To end the prepayment penalty, the Government will provide a discount of about 0.3p/kWh on the gas unit rates under the Price Cap. This brings a typical prepayment bill to £2,046 a year.

6. Are you on a FIXED deal? The EPG reduced what you paid until the end of June

   If you fixed in the last year or so, when prices were very high, your bill will have been subsidised to the EPG level until 30 June, provided your deal is more expensive than that rate. 

   On 1 July, the Price Cap fell below the EPG, so the subsidy is now set at zero, meaning the reduction on gas and electricity rates on fixed deals has ended and your fix will go back to its original price. 

   So if you've fixed recently, it may be worth considering switching to a price-capped standard tariff – possibly even if you need to pay exit fees. 

   You can either ask your existing supplier to move you on to its standard tariff – most will let you do this without paying exit fees – or you can switch supplier, as most are accepting switches to their standard tariffs again, though you will need to pay exit fees unless you're in the last 49 days of your deal.  

   Technically the Price Guarantee for standard tariffs is done as a reduction to the Price Cap unit rates. So until 30 June 2023, the same 2.2p/kWh for gas and 16.6p/kWh for electricity reduction applied to many (not all) fixed rates too. 

   The reduction only applied to fixes that were more expensive than the Energy Price Guarantee. Higher fixed rates at most were reduced only to the level of the Guarantee. The impact of that means different things, depending on how expensive your fixed deal was...

   • Very cheap fix: (eg, from before the energy crisis started). If you already pay less than the Price Guarantee, there's no reduction.

   • Mid-level fix: (eg, fixed three months ago at a premium). If your fix is higher than the Price Guarantee, it should have been reduced to the same level as the Price Guarantee. 

   • High-rate fix: (eg, fixed just before 1 October 2022 at high rate to forestall predicted future hikes). Your fixed rate should have been reduced substantially, but a few of these may still be costlier than the Price Guarantee.

   When a fix ends, you should be automatically moved to a standard tariff, which gets the full EPG reduction (or will be controlled by the Price Cap from 1 July), unless you choose something different.

   The EPG discount on fixed deals until 30 June

   Close

7. You currently pay £300/year even if you use no energy

   You pay for having access to energy even if you don't use it through what's known as the daily standing charge. If you've both gas and electricity, the average direct debit standing charge is £300/year before you use owt.

   It's worth noting there are variances in standing charges by region (for example, if paying by direct debit in London it's £246/year, in North Wales and Mersey it's £332/year) – Ofgem says it is due to the different costs to transport power to where you live.

   From July, we'll be paying the lower Price Cap rates, and this high daily standing charge will remain unchanged – this is something Martin has challenged Ofgem on. 

8. There was a similar guarantee in Northern Ireland – but that ended in June

   The Northern Ireland Energy Price Guarantee offers households the same level of gas and electricity bill support as those in England, Scotland and Wales.

   Suppliers automatically reduced bills for households in Northern Ireland by up to 3.8p/kWh (previously 13.6p/kWh) for electricity and 2.6p/kWh (previously 3.8p/kWh) for gas, meaning a typical household was paying £2,100/year for their energy until the end of June.

   But from 1 July, as the Price Cap for England, Scotland and Wales has fallen below the EPG, the EPG subsidy is now set at zero – including for Northern Ireland. That means you'll likely see a small increase in bills.

   For more, see our Northern Ireland Energy guide. 

9. There's lots of help available if you're struggling to pay your bills

   If you're struggling, there's plenty of help out there, including Government grants and support from your provider. Our full What to do if you're struggling to pay energy bills guide includes all the energy help available.
   

   If you pay by direct debit, you should also check you're paying the right amount for your bills. You can use our 'Direct debit too high?' calculator to get a good idea.

10. There are lots of ways to easily reduce what you use

    Try our interactive energy saving tool, where you can click around a virtual house to find out how much things cost to run and how to cut back. Also, see more Energy saving tips, the Energy mythbusters guide for less clear-cut issues, and our Heat the human guide.