Autumn Statement 2022: Energy Price Guarantee raised to £3,000
The Energy Price Guarantee will be extended for 12 months from April, at an average price of £3,000.
The Energy Price Guarantee which came into effect in October, caps average energy bills to £2,500.
It was originally meant to be in place for two winters but less than three weeks into the scheme, Jeremy Hunt said it would be reviewed after 2023, likely offering more targeted support to low-income households rather than a universal measure.
However, it will now change again in April 2023, capping average bills at £3,000 for the next year, although many households will pay more than this as the amount you’re billed varies on use, as well as unit rates and standing charges.
It had been predicted that bills would rise to an average of £3,730 at this point, according to analysts at energy consultancy Cornwall Insight.
The Chancellor confirmed the change today and said this additional support will reduce energy bills by around £500 per household.
It comes as energy bills have risen significantly this year with the average household energy debt rising by a fifth (19%) to £190 in the past year.
He added that for those households who use alternative fuels such as heating oil and LPG to heat their homes, he will double the amount of support from £100 to £200, which will be delivered as soon as possible this winter.
Energy bill worry
Hunt said: “One of the biggest worries for families is energy bills. This winter, we will stick with the plan to spend £55bn to help households and businesses with their energy bills – one of the largest support plans in Europe.
“From April, we will continue the Energy Price Guarantee for a further 12 months at a higher level of £3,000 per year for the average household.
“With prices forecast to remain elevated through next year, this will still mean an average of £500 support for every household in the country.”
Accompanying documents revealed the government will keep the EPG under review and “may revisit” the parameters of the scheme, for example if the forecast cost increases significantly. Further, for those who use very large volumes of energy, they will have their state support capped, while the vast majority of households can continue to benefit.
“This proposal is intended to ensure taxpayers do not subsidise all of the energy usage of those households with extremely high usage. This consultation will explore the best ways to ensure that vulnerable high energy users, such as those with medical requirements are not put at risk,” the document noted.
‘Life will be tougher next spring’
Sarah Coles, senior personal finance analyst for Hargreaves Lansdown, said: “The new energy support package will come as something of a relief for average earners, who were worried they might be left out in the cold. The new package, from April, will keep bills at £3,000 for average users – protecting them from a rise to as much as £3,700.
“This still leaves them with a horrible mountain to climb. In March this year we were paying an average of £1,277 on our energy bills, so we’ll have to find almost two and a half times more cash to pay our bills within 13 months. The fact that this comes on top of so many other price rises means life is going to get even tougher next spring.”
From April 2024, the government said it will develop a “new approach” to consumer protection in energy markets. It will work with consumer groups and industry to consider the best approach, including options such as social tariffs, as part of wider retail market reforms. “The objectives of this new approach will be to deliver a fair deal for consumers, ensure the energy market is resilient and investable over the long-term, and support an efficient and flexible energy system.”
Hikes to the energy windfall tax
And, as predicted by experts in YourMoney.com last week, the government also confirmed it will increase the energy windfall tax to 35%, from 25%, to raise an extra £14bn.
The tax, known as the Energy Profits Levy, will rise on 1 January and stay at the higher rate until 2028. A temporary 45% levy on electricity generators will also be introduced from 1 January.
The government has been under pressure to increase the tax as energy prices in the UK rise significantly.
Hunt also announced further cost of living payments which will be made next year to some people. Those on means-tested benefits will receive a £900 payment, pensioners will receive £300, and those receiving disabled benefits will receive another £150 payment.
There will also be a 12-month extension to the household support fund.