The Energy Price Guarantee introduced by the UK Government will help limit the cost of rising energy prices. The scheme came into effect on 1st October 2022 sees domestic household bills benefit from a cap on the maximum price a unit of energy is charged to the consumer at. The guarantee for households will last until the end of March 2023. These new measures will be applied automatically by your supplier.
Ofgem had recently indicated that the typical household bill for energy usage would reach £3,549 per year under their price cap but the new Energy Price Guarantee will see the typical household bill be held at around £2,500 (average price shown as an annual amount). You will still pay for what you use but the scheme limits the unit cost. Those with higher than typical usage costs will still pay more than £2,500; those with lower than typical usage will pay less than £2,500.
The planned £400 reduction in energy bills previously announced for this Autumn/Winter will still also be paid to help households meet costs. If you receive a bill for your usage or pay by direct debit your discount will be offset automatically against your electricity bills during the course of October to March by your supplier. Those with pre-payment meters will receive top up vouchers from their supplier to benefit from the £400 reduction and these are likely to be paid out to customers over a number of instalments.
Martin Lewis of Money Saving Expert has put together a useful information article and video which helps explain the effect of Energy Price Guarantee and what it will mean for you: Energy Price Guarantee explained by Martin Lewis, Money Saving Expert
Normally, your current supplier could usually be able to switch you to a cheaper tariff or you would be able to switch to a cheaper provider. However due to surging prices most suppliers are unable to offer anything more competitive than price cap, which means there is little incentive to change suppliers just now. The new guarantee will also apply to those on existing fixed deals and adjustments will be made automatically by the supplier.
Energy Saving Trust have provided insight into the question as to why are energy bills going up?
Despite the new price freeze, energy bills have still risen considerably since this time last year and this has pushed many into fuel poverty and hardship, especially those with low fixed incomes. The Energy Price Guarantee had initially been scheduled to run for a period of 2 years for all household but this was recently amend by the UK government meaning that the scheme will end in early spring 2023, after which there will be a further review of how energy costs will supported and who will be eligible to receive this after March 2023. Extreme fuel poverty is defined as a household forced to spend 20 per cent or more of their net income to pay for energy, after their housing costs have been deducted; increasing prices have unfortunately put many more households within this definition.
What if I opt to cancel my direct debit and pay what I can afford to bills?
If you opt to make manual payments to quarterly energy bills you will likely pay a tariff 6% more expensive than your monthly direct debit. If your bills are accurate, underpaying what has been billed will lead you falling into arrears. Many people now have smart meters, and these can be remotely switched to act as a prepayment credit meter. Paying for energy by prepayment meter is more expensive than direct debit.
Specific issues relating to pre-payment meters
Aside from the increased cost of using pre-payment meters, there is the scope for restricted energy usage and worse, the prospect of self-disconnection in the winter because you simply can't afford to top up the meter. If you are a pre-payment customer with low income who cannot afford to top up your meter you should consider this a crisis and you may wish to contact your local authority to check if crisis support is available to help you top up. Our article Getting help with a crisis provides further details on how to access this type of support. You may also wish to consider making an application to the Home Heating Support Fund.
What to do if you can't afford your monthly direct debit for gas and electricity?
If your bill is accurate and you are struggling to pay it, speak to your supplier as soon as possible to try and agree with your supplier to possibly pay this over a longer period of time. Most suppliers are keen for you to pay off what is outstanding ahead of your next billing period but this will not always be possible.
Work out what you can realistically afford to pay from your budget towards your bill and ask your supplier if they will accept this over a prolonged period. Our article on what do if you are struggling with your money can help you with the tools to work out what you can realistically afford to repay.
If you get into arrears with your energy supplier this is likely to have an adverse impact on your credit rating. If you're in arrears energy companies have an obligation to explore all possible reasonable and affordable repayment plans with you.
If a repayment plan can't be agreed your supplier requires a warrant from court to enable them to enter your home to fit a prepayment meter. It is possible to oppose this, and you should get urgent free advice from a local law centre or money advice agency.
Our below articles provide further advice and guidance on what to do if you fall into arrears:
I have fallen into arrears with my energy bills will I be disconnected?
I have very low income, I am really struggling with paying off my arrears
What support is available to support me with rising energy costs?
The UK Government announced a range of support measures to help with rising cost of living, including energy bills. Most households will receive some support and for those in receipt of certain benefits they will also receive further additional payments. The Government have also introduced the Energy Price Guarantee which will run until the end of March 2023 which caps the rate at which energy is charged. This is a reduction in the time frame that was initially announced by the government. This is a fast changing political issue and many campaign groups continue to call for increased and continued support for those most impacted by rising costs after the end of March 2023.
Full details of the support that has currently been announced can be found here:
We have outlined some additional benefit payments and resources, such as energy suppliers hardship funds, that may be of further help (redirects you to a new page)
From a practical point of view, reducing your energy usage in a appropriate way may help marginally mitigate some of the price rises. The consumer website Money Saving Expert has put together some energy saving tips that might help you https://www.moneysavingexpert.com/utilities/energy-saving-tips/
Priority Services Register
Energy suppliers keep a register of customers who are deemed as vulnerable and extend additional support to them. You can check if you are eligible to join your suppliers Priority Services Register here: https://www.ofgem.gov.uk/getting-extra-help-priority-services-register
If you identify that you are eligible, you should contact your supplier to get them to add you to their register. If you ever switch supplier in future you should remember to update your new supplier.
If you are concerned about your bills or have fallen into arrears you can chat to our free, impartial and confidential, online money advisers using the webchat function on this site. The chat is monitored Monday to Friday (excluding public holidays) 9.30am - 12.30pm & 1.30pm - 4.30pm.