Government announces new limit on energy bills of £2,500 for a typical household

Photo: Vladimir Semenov - stock.adobe.com

A new ‘Energy Price Guarantee’ limits the price suppliers can charge customers for units of gas from 1 October

Under plans announced today by the new Prime Minister Liz Truss, a typical UK household will pay no more than £2,500 a year on their energy bill for the next two years from 1 October, through a new ‘Energy Price Guarantee’ which limits the price suppliers can charge customers for units of gas.

The government will provide energy suppliers with the difference between this new lower price, and what energy retailers would charge their customers were this not in place.

This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.

This will save the average household £1,000 a year based on current energy prices from October. It comes in addition to the announced £400 energy bills discount for all households.

Those households who do not pay direct for mains gas and electricity – such as those living in park homes or on heat networks – will receive support through a new fund.

Prime Minister Liz Truss said: “Decades of short-term thinking on energy has failed to focus enough on securing supply – with Russia’s war in Ukraine exposing the flaws in our energy security and driving bills higher. I’m ending this once and for all.

“I’m acting immediately so people and businesses are supported over the next two years, with a new Energy Price Guarantee, and tackling the root cause of the issues by boosting domestic energy supply.

“Extraordinary challenges call for extraordinary measures, ensuring that the United Kingdom is never in this situation again.”

As businesses have not benefited from an energy price cap and are not always able to fix their energy price through fixed deals, many are reporting projected increases in energy costs of more than 500%.

A new six-month scheme for businesses and other non-domestic energy users (including charities and public sector organisations like schools) will offer equivalent support as is being provided for consumers.

After this initial six-month scheme, the government has said it will provide ongoing, focused support for vulnerable industries and that there will be a review in three months’ time to consider where support should be targeted.

Schemes previously funded by green levies will also continue to be funded by the government during this two-year period.