Energy Price Guarantee expected to be extended by three months - reports

The planned rise to the Energy Price Guarantee (EPG) - which freezes the unit price of energy - has been delayed by at least three months, according to a report by The Times. 

In its exclusive report, The Times says the EPG, which was due to rise, costing the average household £3,000 per year for its energy bills from April and is set to be kept at a typical £2,500 for an extra three months by the Chancellor, Jeremy Hunt. 

The move is widely expected to be confirmed in the government's spring budget on 15 March, if not before. 

In a recent interview with Channel 5, Jeremy Hunt said: "I'm not going to confirm anything about the budget. But we look at all sorts of options, always within the context of being responsible with people's money, with public finances."

Crucially, the EPG does not set a total limit on how much your bills can cost. It only limits the unit cost of energy, setting a maximum price per kilowatt hour (kWH) energy firms can charge you for the gas and electricity you use, plus standing charges. 

The more energy you use, the higher your bills will be.

The government stepped in last year to tackle out-of-control energy bills with the EPG, effectively using taxpayer money to pay the difference between the EPG rate, and the Ofgem Price Cap - bringing down household energy bills.

Earlier this week it was announced the Ofgem Energy Price cap will drop from more than £4,000 to £3,280 in April - June for typical use, which has given the government the wiggle room it needs to continue to subsidise the difference and maintain the Energy Price Guarantee at £2,500.

And, based on current forecasts, the government will not have to subsidise bills for long.

Cornwall Insight suggests the typical bill under the Ofgem price cap could drop to around £2,362 a year for typical households from July, substantially lower than the EPG amount of £2,500. With average household energy bills then staying around that level for the rest of 2023.

*Source: Cornwall Insights 

But, households will lose the £400 energy grant paid to them in four instalments until March 2023, as extra help on energy bills. 

Billpayers will still feel the sting of this discount ending in March 2023.

The EPG is intended to help families tackle the cost of living crisis, which is primarily being driven by rising energy, food and fuel prices.

Here we explain what the EPG means for your bills and the support available to you.

What does the Energy Price Guarantee mean for your energy bills?

The EPG limits the unit cost of energy, in the same way pre-existing Ofgem energy price cap does. It is the maximum price per kilowatt hour (kWH) energy firms can charge you for the gas and electricity you use, plus standing charges.

It means there isn’t a total limit on how much your bills can cost - the more energy you use, the higher your bills will be. 

You can use our energy bill calculator to get a personalised view of how much you can expect to pay based on forecasts by energy analysts Cornwall Insights.

The typical household on a standard variable rate tariff has still been paying a lot more for energy this winter compared to 2022.

It’s important to note these are averages. Standing charges vary from region to region. Some parts of the UK  - usually remote regions -  have seen big jumps in standing charges in recent years as the cost of supplying energy has risen.

Households still receive the £400 payment for energy bills

The £400 payment will be made from October 2022 and will be spread over six months instead of one lump sum payment. 

If you're eligible your household will get a discount of £66 applied to your energy bills in October and November, and then £67 a month from December to March 2023.

You do not have to pay back the £400 - as former chancellor Rishi Sunak put it, “not a penny to repay."

The government has also said it will introduce legislation to make sure landlords pass the £400 energy discount on to tenants who pay all-inclusive bills.

But the government has let energy suppliers decide how to give out the money - for example whether to deduct it from your Direct Debit payments or refund the amount to your bank account.

Find out how your energy firm will pay your £400 energy rebate.

The £400 payment will also be extended to include people such as park home residents and tenants whose landlords pay for their energy via a commercial contract.

An extra £100 will also be given to homes that are off the gas grid to help with the rising costs of alternative fuels such as heating oil.

What does the Energy Price Guarantee mean if you're on fixed tariff?

If you’re one of 4.2 million households in the UK on a fixed tariff, you will get an automatic discount automatically applied to your tariff by your energy supplier.

But, there are some caveats.

• If you’re on a fixed rate tariff it can be reduced by up to 17p/kWh for electricity and 4.2p/kWh for gas until you hit a ‘floor’ unit rate. 
• On average the ‘floor’ unit rate will be 10.3p/kwh for gas and 34p/kwh for electricity if you pay by direct debit.
• It means most households shouldn’t be paying more than 10.3p/kwh for gas and 34p/kwh for electricity - but there are a handful of homes on higher price fix tariffs who could still be paying more.
• If you already have a fixed rate tariff below the ‘floor’ rate, you’re on a good deal and can continue befitting from lower prices until your fixed rate ends.

If you are already on a standard variable tariff, then you do not need to do anything; your bill should have been adjusted automatically on 1 October.

Many firms are also waiving exit fees for customers on fixed tariffs so you can switch to the standard variable tariff.

Further energy bill support

• Every household will receive the £400 energy grant from October.
• Energy suppliers also have hardship funds to help their customers in need.
• You may also find our article on unfair direct debit increases useful. See how The Money Edit helped one reader bring her direct debit down after her energy firm increased it from from £117 to £369.