8 September 2022, Liz Truss stated that ‘Energy will be affordable again’. This statement provides a sense of hope and somewhat comfort for the nation. Her announcement defined several plans to limit the energy bill rise. This blog intends to outline them to educate you.
Domestic Price Cap
Domestic energy is the energy used by a household in the form of gas and electricity. The amount of domestic energy people used is subjective as it can vary depending on factors such as lifestyle, climate, location, and property type.
Parliament installed the domestic gas and electricity (tariff cap) act that Ofgem (the UK’s energy market regulator) oversee. The price cap legally ensures that customers are protected by capping their energy costs at a fair price so that suppliers cannot overcharge them. The price usually reflects that of the energy market therefore twice a year (in April and October) Ofgem adjust the price cap to reflect it accordingly.
Liz Truss plans to introduce an energy price guarantee for the next 2 years, with the average household’s energy bills being capped at around £2500 from 1st October. The price cap is calculated on an average household therefore not all households will pay £2,500.
Domestic Energy Price Cap Explained.
Energy will be calculated based upon consumption therefore if you use a significant amount of energy through things like:
- leaving your appliances on standby
- cooking all the time
- using aircon or heating a significant amount of water (hot tubs, pools etc.
then your bill will likely be over £2500 – this figure solely reflects the average household.
On the flip side, if you live in a smaller property like a flat and are energy efficient, your bill will likely be less than £2500. We are currently waiting for the new unit and standing charge prices which are how your energy bill will be calculated.
The price cap will save households around £1000 annually based on the recent increase Ofgem advised when they increase the Price Cap to £3500.
This price cap has been negotiated and agreed upon by suppliers. The price cap will also be applied to heating oil supplies.
The previously announced winter discount for every UK household is due to be given a £400 energy bill rebate to help with bills from October. £650 will also be paid to low-income households who currently receive benefits or tax credits.
Pensioners and disabled people will also receive further payments to help.
Business energy cap
There is a separate 6-month fixed support scheme coming for all businesses, charities, and public sections (such as schools and hospitals) that will be the equivalent guarantee wise as domestic support.
This is yet to be announced by the chancellor of the exchequer. due to the death of Queen Elizabeth the 2nd, this is all being delayed for 10 whilst the government cannot sit.
After 3 months the chancellor will be announcing what the vulnerable sectors are; these will continue to receive support past the 6-month mark- this is likely to include hospitality.
At present NO plans have been put in place or voted in by the Government.
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