What is the energy price guarantee, and why is it being extended?
Chancellor Jeremy Hunt has laid out plans to extend the coverage of the energy price guarantee for the next three months, ahead of today’s Spring Budget.
On Wednesday moring, the Government made an announcement confirming that the energy price guarantee would remain in place until June.
It means average bills will be capped at £2,500 a month until June, rather than increasing to £3,000 next month as planned.
The Treasury U-turn is expected to cost the Government around £3 billion.
Here’s what you need to know about the energy price guarantee.
What is the energy price guarantee?
Regulator the Office of Gas and Electricity Markets (Ofgem) puts a cap on the amount energy suppliers can charge customers on default or standard and variable tariffs.
The price cap, launched in January 2019, was originally a temporary measure, but has remained in place because of problems in the industry.
It applies to homes on a default energy tariff, whether you’re paying via direct debit, standard credit or a prepayment meter.
In response to soaring gas and electricity prices in September, then-prime minister Liz Truss announced that the typical UK household would pay no more than £2,500 a year for energy for two years.
Without intervention at the time, the average household bill would have risen by 80 per cent from £1,971 to £3,549 a year.
When Mr Hunt became Chancellor in October, he dramatically scaled back the support package. He also ditched tax cuts promised by his predecessor, Kwasi Kwarteng, as he sought to restore stability following huge turmoil in the financial markets.
Government support has saved the typical family £1,300 since October and stopped the average household energy bill from hitting £4,279 a year over the winter.
Energy bills will still be higher or lower depending on how much energy is used. For example, energy bills will still be lower in a well-insulated home that uses less energy.
You do not need to apply, and there is no need to contact your energy supplier, as the discount is automatic.
Why is the energy price guarantee being extended?
Mr Hunt said on Wednesday: “High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level.
“With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”
Mr Sunak added: “We know people are worried about their bills rising in April, so to give people some peace of mind, we’re keeping the energy price guarantee at its current level until the summer when gas prices are expected to fall.”