Energy price guarantee confusion for 40% of billpayers
Two in five households (38%) wrongly believe the energy price guarantee means their utility bill can’t exceed £2,500 a year.
Earlier this month, new Prime Minister, Liz Truss, announced the £2,500 energy price guarantee to tackle rising energy bills which were due to rise to £3,549 in October.
It will help 24 million people who pay their provider’s standard variable tariff and is expected to cut £1,000 off average bills.
But data from comparison site Uswitch revealed widespread confusion around the new measure, with many not understanding that the £2,500 figure is an illustration of an average household’s yearly bill, and not a fixed upper limit.
This echoes YourMoney.com’s earlier warning that the £2,500 energy guarantee isn’t a cap on total bills.
Instead, it caps the price providers can charge for standing rates and unit charges. This means actual bills could be higher or lower depending on the amount of energy used.
Even with the guarantee, prices are still significantly higher than they were in 2021. It’s expected that even with the £400 energy bill support, many could be paying around £237 on average more for energy in December, January and February than they did last year.
The Uswitch poll of 2,000 also found that a third said they will need to make adjustments to their spending to pay for their energy bills, while 37% said they feel anxious about how they will pay.
Two in five households said they plan on cutting down their spending on non-essentials, such as clothes and streaming services, to cope with rising bills. A third said they were cutting back on going out, while 23% said they will reduce their pension savings.
‘False sense of security’
Many will turn to borrowing to pay higher bills with 8% using their overdraft, 6% borrowing from friends and family, and 5% taking out a loan.
While 8% said they will need to take a second or additional job to cover rising costs, 4% will move in with someone else to share their bills, and 3% will either rent out a room in the home or spend the winter overseas.
Switching energy providers used to be the best way to cut costs but now it’s not possible to get the same savings as before. But there are ways to cut back. See YourMoney.com’s Seven ways you can reduce your energy bills for more information.
Ben Gallizzi, energy expert at Uswitch.com, said: “It is important to remember that the price guarantee of £2,500 is only an average bill — so you will pay more if you use more energy.
“It’s possible the announcement has created a false sense of security for some, especially for larger households who may pay significantly more this winter.
“It’s really important that households track their energy and cut their usage where possible — as well as keep an eye on all household spending.”