Truss introduces Energy Price Guarantee to tackle rising energy bills
Truss introduces Energy Price Guarantee to tackle rising energy bills Sep 09, 2022
On 8th September, new PM Liz Truss confirmed her introduction of the Energy Price Guarantee.
After Ofgem confirmed the new price cap in October, households across the country were left with concerns about the future cost of living.
The government was urged to to take action, which Truss answered to with the Energy Price Guarantee.
A recap on the energy price crisis
Last October, the energy price cap was raised to £1,277 a year, with the current price sitting at £1,971.
This August, Ofgem announced the price cap would be increasing to £3,549 a year on average, meaning an increase of 80%.
The price cap is due to rise again in January, but with the volatile prices of wholesale energy, Ofgem cannot confirm how much by.
The cause of this steep increase was understood to be due to the strain put on energy suppliers by these unpredictable and rising costs, undoubtedly made worse by the conflict between Russia and Ukraine.
The Energy Price Guarantee now means that the typical household will now pay up to £2,500 on average per year, saving households around £1,000 from the expected price cap increase.
This will be in addition to the £400 energy bill support scheme, meaning household costs could average at £2,100.
This applies to all households in Great Britain, and it is said that the same level of support will be extended to those in Northern Ireland.
Businesses and public sector organisations can also expect to see equivalent support.
These changes will not come into place until October 1st, and suppliers should be in contact with consumers beforehand.
Many asking is the new 2yr 1 Oct price guarantee any good for consumers? Well
- It is FAR more expensive than energy was last winter - It is FAR cheaper than it was going to be this winter.
Martin Lewis shares a table, spelling out the price increases over recent months.
How does this work?
When announcing the new plans in parliament, Truss stated: "This has been agreed with energy retailers... Securing the wholesale price of energy while putting in place long-term measures to secure future supplies at more affordable rates."
While household energy bills will still vary based on usage, this will limit the amount bills can rise, by placing a cap on the unit price of energy.
The scheme will be paid for with government borrowing, and will be compensate energy firms the difference between the actual cost of energy and the price consumers pay.
As the price of wholesale energy is ever-changing, an accurate cost for these plans can only be predicted, however it could be up to £150 billion.