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Energy Price Guarantee need-to-knows
Everything you need to know about the Government's energy discount
Updated 15 March 2023
The Energy Price Guarantee was introduced on 1 October 2022, effectively cancelling the planned 80% Price Cap rise – prices still rose, but by far less. We take you through what the Energy Price Guarantee (EPG) is and what it means for your bills.
Martin Lewis: The 20% rise to the EPG has been postponed – what it means for your bills
The Government has now announced that the planned 20% rise to the EPG in April has been postponed, as we've been campaigning for. MoneySavingExpert.com founder Martin Lewis explains what this means below and how the EPG and Energy Price Cap work together.
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Energy Price Guarantee: 10 need-to-knows
The Energy Price Guarantee (EPG) controls what most of us pay for our gas and electricity, so here are our 10 need-to-knows to ensure you know how it works and what it means for your bills.
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The Energy Price Guarantee is a Government subsidy that brings bills down to £2,500/year 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 £5,000. 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 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 provides a set discount on Ofgem's Price Cap to bring bills down to £2,500/year for a typical household paying by direct debit until July 2023 – 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. To get an idea of what you'll pay, see our 'Energy Price Guarantee' calculator.
Annual bill for a typical household
Payment method 1 January to 31 March 2023 1 April to 30 June 2023 Direct debit £2,500 £2,500 Standard credit (on receipt of bill) £2,754 £2,702 Prepayment £2,579 £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.
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The Energy Price Guarantee was due to rise 20% in April – but this has now been postponded after our campaign
On 1 April 2023, the Energy Price Guarantee 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 has now announced this rise will be postponed and bills will remain at a typical £2,500/year until July.
This comes after over 110 charities supported Martin and MSE's campaign urging the Chancellor to keep the Energy Price Guarantee (EPG) at its current level or millions more would face fuel poverty.
The EPG will instead rise to £3,000/year in July – however, it's unlikely this increase will have any impact on bills now. That's because Ofgem's Energy Price Cap is predicted to fall well below this level in July, and households pay whichever is the lower of these two rates.
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The EPG unit rates and standing charges from April
Here are the average dual-fuel direct debit rates for the Energy Price Guarantee from 1 April. Energy suppliers can't charge more than this, but the exact limit varies by region.
- Electricity:
Unit rate: 33.21p/kWh (currently 34.04p/kWh)
Standing charge: 52.91p/day (currently 46.36p/day)
- Gas:
Unit rate: 10.31p/kWh (currently 10.33p/kWh)
Standing charge: 29.11p/day (currently 28.49p/day)
For full info, including regional rates, see our guide on Energy Price Guarantee unit rates.
On Eco 7, Eco 10 or other non-standard tariff? Firms should reduce tariffs so the reduction works on the weighted average of the combined rates (around 2.2p/kWh for gas and 16.6p/kWh for electric from April), but it's up to firms how they implement this, so we can't say for certain what the rates you'll pay are. We've got more info in our Is Economy 7 right for you? guide.
- Electricity:
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The £400 Government support is ending in March – so what you pay will still rise
While the EPG being frozen at its current level is good news, households will still see an increase in their bills from April.
That's because the Energy Bill Support Scheme, which saw virtually all households get £400 off their bills this winter (paid as £66/£67 a month), is ending in March. This brought bills down to the equivalent of £2,100/year on typical use over the winter. So despite the EPG rise remaining at its current rate from April, for most, it'll still feel like a 19% hike. To check how much your bill could rise, see our Energy Price Guarantee calculator.
You should have either received, or had your bill reduced by, £66 or £67 each month between October 2022 to March 2023. Yet many have not had all their payments yet – if that's you there's still time to get it.
If you're on prepay, check you've redeemed your vouchers. Over 1.9 million prepayment vouchers delivered under the scheme are still to be redeemed, according to the latest official statistics. See prepay voucher help for full info.
If you didn't get the £400 support automatically through your electricity supplier (such as those who live in a park home or those who have a landlord with a commercial energy contract, rather than a domestic one) you can apply to receive the discount through the Energy Bills Support Scheme.
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Ofgem's Price Cap still runs in the background
Regulator Ofgem stills sets the Price Cap every three months (setting a limit on what providers can charge per unit on their standard tariffs), but no one pays the full amount right now, due to the EPG discount.
Currently, the Price Cap is £4,279/year for a typical household, but under the EPG it's £2,500/year – so the state is essentially subsidising the difference of £1,779/year on average for every household in England, Scotland and Wales.
From 1 April, the discount will be much smaller – around £780/year for a typical household – as the Price Cap from then will be £3,280/year. Ofgem has lowered the Price Cap due to recently falling wholesale prices – watch Martin explain why.
We've full info on the current Price Cap unit rates and future predictions in See our Energy Price Cap guide for full info on how it works.
You pay the lower of the Price Cap and the EPG
From 1 July, the Price Cap is predicted to fall below the EPG, meaning the EPG will fall away, and anyone on a standard variable tariff (which is most people right now), will start paying the Price Cap rates from then. Cornwall Insight are predicting that the July Price Cap will be £2,013/year, meaning a typical household paying by direct debit will see their energy bills drop by almost £500/year from the current £2,500/year EPG rate.
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 THE PREVIOUS RATE
1 October 2022 to 31 December 2023
£3,549/year
£2,500/year THE CURRENT RATE
1 January 2023 to 31 March 2023
£4,279/year.
£2,500/year 1 April 2023 to 30 June 2023
£3,280/year
£2,500/year 1 July 2023 to 30 September 2023
Weak prediction (1)£2,013/year
£3,000/year 1 October 2023 to 31 December 2023
Weak prediction (1)£2,003/year
£3,000/year (1) According to the latest prediction (on Wednesday 15 March) from analysts at Cornwall Insight. (2) The prepay Price Cap is about 2% higher, and for those who pay each month after getting a bill, 6% higher. That differential will likely continue.
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Are you on a FIXED deal? The EPG reduces what you pay too – but that's likely to change
Technically the Price Guarantee for standard tariffs is done as a reduction to the Price Cap unit rates. The same 6.4p/kWh gas, and 31.8p/kWh electricity (2.2p/kWh for gas and 16.6p/kWh for electricity from April) reduction applies to many (not all) fixed rates too.
The reduction only applies to fixes that are more expensive than the Energy Price Guarantee. Higher fixed rates at most have been 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 the Price Guarantee rate, unless you choose something different.
If the Price Cap falls below the Energy Price Guarantee, fixed tariffs will no longer get any discount
If, as predicted from July, the Price Cap falls below the EPG level, the reduction on gas and electricity rates on fixed deals will end. So if you've been benefitting from an EPG discount on your fixed rate tariff, this means that what you pay is likely to go up from July.
If this happens, you may be better off checking if you can switch to your provider's standard tariff (though do check) – many suppliers allow you to move from a fixed deal to their standard tariff penalty-free.
- Very cheap fix: (eg, from before the energy crisis started). If you already pay less than the Price Guarantee, there's no reduction.
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You currently pay £273/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, until 31 March 2023 the average direct debit standing charge is £273/year before you use owt.
It's worth noting there are variances in standing charges by region (for example, the unit rate for electricity if paying by direct debit in London is £225/year, South West England £296/year) – Ofgem says it is due to the different costs to transport power to where you live. Standing charges for electricity will rise on 1 April, due to changes to the Price Cap, meaning the standing charge will increase to £300/year.
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There's a similar guarantee in Northern Ireland
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 have reduced bills for households in Northern Ireland by up to 13.6p/kWh for electricity and 3.9p/kWh for gas, meaning a typical household are currently paying £1,950/year for their energy. You won't need to do anything to get this reduction, it will be done automatically.
For more, see our Northern Ireland Energy guide.
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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.
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There are lots of ways to easily reduce what you use
Try our new 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.
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