What the new rate means for you and when your bills will rise next

What the new rate means for you and when your bills will rise next
What the new rate means for you and when your bills will rise next

The energy price cap has been raised to £4,279 a year, but most households will be protected by the government’s energy price guarantee, meaning bills won’t rise until April 2023 .

Ofgem, the UK’s independent energy market regulator, has announced that the price cap will rise by 20% to £4,279 in January 2023.

Most people will be protected by the Government Energy Price Guarantee, which limits the amount a typical household will pay for energy, reducing the average annual bill to £2,500.

Electricity will cost 34p per unit and gas will be 10.3p until April. The guarantee was introduced in October, as energy prices soared following Russia’s invasion of Ukraine.

The change to the energy price cap means the government’s bill for energy price guarantees is set to fall from around £7.8billion in the last three months of 2022 to £15.1billion pounds sterling in the first three months of 2023.

The energy price cap works by placing a limit on the maximum amount that can be charged for each unit of energy, which means that if a household uses more energy, occupants will pay more, and if they use less, they will pay less.

The cap applies to households benefiting from a default energy tariff, paid by direct debit, standard credit or prepaid meter, but excludes those benefiting from a fixed-term tariff.

In his Autumn statement last week, Chancellor Jeremy Hunt confirmed that energy bills will rise to an average of £3,000 from next April. The universal payment of £400 to all households to help pay this winter’s bills will also end from April, leaving many to spend an extra £900 a year.

The Government’s Energy Bill Support Scheme means that households are currently receiving a £66 or £67 reduction on their total energy bills from October and ending in March.

Ofgem said without government help consumers would have been charged 67p per unit for electricity and 17p for gas from January. This means that the Energy Price Guarantee will save typical households around £1,779 a year.

The Alternative Fuel Payment fund will support those who live off town gas and electricity.

The government has said eligible households will receive a £200 credit towards their electricity bills, but has not confirmed when that payment will be made. It aims to finance part of the system through exceptional taxes on gas, oil and electricity companies.

Ofgem launched the original price cap in January 2019 as a temporary measure, which remained in place due to the current energy crisis.

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