The UK’s Energy Bill Relief Scheme: What you need to know
As the cost of living crisis in the UK continues to hammer down on households, the latest government effort could offer some much-needed relief. From October 1st, 2022, typical household electricity bills will be capped at GBP £2,500 a year for the next two years. The government’s initiative comes at a time when energy prices in the UK are soaring, amidst the highest rates of inflation the country has seen since the early 1980s. We take a closer look at the UK’s Energy Bill Relief Scheme in this Pacific Prime UK article.
Why are electric bills going up in 2022?
Before we discuss the UK energy price cap, it’s important to address the question on everyone’s mind: what affects the changes in energy prices?
You’ve likely already heard about the energy crisis, but may be wondering what it means for your electricity bills. Many countries, including the UK, are being affected by the ongoing shortage of energy globally. Once countries started to recover from the COVID-19 pandemic, demand for gas went up.
However, a shortage in supply prevented demands from being met, thereby resulting in rising gas prices in 2021. The problem was exacerbated by less renewable energy (e.g. from wind and solar sources) and the need for heating during cold winter months. Most recently, the war in Ukraine has affected supplies and increased prices even more.
What the new energy plan means for you
You’re probably wondering what the new energy cap means for you and, more importantly, how much you will have to pay. You’ll still have to pay for the electricity and gas you use, however, the new price cap places a limit on what suppliers can charge for each energy unit. Typical households, or ones that use 2,900 kWh (kilowatt hours) of electricity a year and 12,000 kWh of gas a year, will not have to pay more than GBP £2,500 from October.
Without the price cap, your annual bill would have been GBP £3,549. For dual fuel customers making direct debit payments, the average electricity price per kWh in 2022 in the UK will be limited to GBP £34, while the average gas price per kWh in 2022 in the UK will be limited to GBP £10.30.
The “energy price guarantee” applies to all households in England, Wales, and Scotland, while Northern Ireland will have access to the “same level of support”. This plan will last two years.
Most households are not considered typical
Naturally, you’ll have to pay more if you use more. But on top of that, it’s important to consider that most households aren’t truly typical since factors like the number of residents, property type, and energy consumption all count. An example from the UK government suggests the following prices according to the type of property:
- Purpose-built flat: GBP £1,750
- Mid-terraced house: GBP £2,350
- Semi-detached house: GBP £2,650
- Detached house: GBP £3,300
The government also said many individuals on fixed deals will get a discount, though those on an expensive fixed tariff could have to pay more than their standard variable counterpart. The standing charge (or fee that customers pay to be connected to the energy grid) will be GBP £28 a day for gas and GBP £46 a day for electricity.
What help is available for businesses?
From October 1st, 2022, the Energy Bill Relief Scheme will see wholesale energy prices capped for all businesses for six months. Likewise, prices will be fixed at GBP £7.50 per kWh for gas and GBP £21.10 per kWh for electricity. The government says these figures are less than half the wholesale prices that were to be expected this winter.
Firms currently aren’t covered by an energy price cap like households are. Organisations that have been on a fixed price contract since April 1st, 2022 (at the earliest) will be eligible for the scheme. Those on variable tariffs will automatically get a discount for each unit of energy used. Similarly, the savings will be applied automatically and start showing on November’s bills.
The scheme will apply to non-domestic energy customers in England, Wales, and Scotland, while a parallel scheme will be organised in Northern Ireland.
Is there anything else that can help me pay my energy bills?
All households in the UK will receive a one-off GBP £400 discount on their energy bills from October. Additionally, over 8 million low-income households on means-tested benefits will be paid GBP £650 in two lump sums (one in autumn 2022 and the other in July 2023). Pensioner households and disabled people will also receive further payments of GBP £300 and GBP £150, respectively.
Along with hardship funds run by energy companies, vulnerable families can claim help through:
Further reading: How employers can support employees during the cost of living crisis
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