A chilling statistic made headlines last month, predicting that up to two-thirds of UK families could face energy poverty by January 2023. The government support already announced was clearly not cutting the mustard, as even middle-income households would find themselves with huge energy bills that they would not be able to pay. Inflation also reached a 40-year high of 10.1%, which further weighed on household stock markets.
In response to this tidal wave of bad news, newly appointed Prime Minister Liz Truss has set an energy cap of £2,500 to help struggling households this winter. In long-awaited good news, Truss’ first set of policies as Prime Minister should help reassure households as the colder months set in.
The new legislation in more detail
The new price cap is due to start on October 1, 2022 and will last for two years. Prices charged by suppliers will normally fluctuate, but the government will cover the excess amount. For those living off-grid, including those in mobile homes and using heating networks, support will also be offered in the form of a discretionary fund.
As for businesses and other non-residential energy consumers, they will benefit from the same support, but for a shorter period of six months. After this initial six-month program, support will be extended for vulnerable industries. This will be reviewed every three months and more details will be announced soon.
How does this affect you?
Depending on your household income and the type of tariff you apply to, this price cap will mean different things. If you want more clarity, go to a trusted lawyer to find out what this new legislation means for you.
- A ‘typical’ household could see an annual bill reduction of £1,000 based on current prices.
- Households will still be eligible for the £400 Energy Bill Support Scheme, paid in 6 monthly installments from October.
- The most vulnerable UK households could also receive £1,200 of aid in installments throughout the year.
- For those who are not part of the programs and live off-grid, equivalent support will be provided.
Those who set their rate at higher rates to cover the excess will see their rates reduced to get more for their money. If you prefer to opt out of your fixed rate to benefit from the new price cap, wait until you know your new rates and then make a decision. It might be more profitable to stay at your current rate.
framework latest legislation could go a long way towards making winter more bearable. While long-term plans are unclear, this energy cap is good news for households across the UK.