Energy bills: 4 million to save £45 as Jeremy Hunt to announce major reform | Personal Finance | Finance
The Chancellor is expected to use his spring Budget to take direct action on energy bills to help Britons save money. On Wednesday, Mr Hunt is set to end the prepayment meter penalty from July onwards.
It is thought such a move will help families save £45 per year on their energy bills from the summer onwards.
Currently, households on prepayment meters pay more on average when compared to direct debit customers.
This is because of the extra costs firms take on managing meters, such as supplying vouchers and collecting payments.
These costs are then passed on to users, creating more of a financial burden when it comes to their energy bills.
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This is compounded by the fact the bast majority of households who rely on prepayment meters are typically vulnerable and on a low income.
However, the Chancellor is expected to announced “fairness reforms” to energy bills at his spring Budget.
This move is set to bring the bills of families on prepayment meters in line with average direct debit energy bills under the Energy Price Guarantee.
The change is expected to kick in on July 1 through updates to the Energy Price Guarantee.
This is thought to cost the Government some £200million, but save families £45 a year.
Grant Shapps, energy security secretary, said: “Charging prepayment meter customers more to receive their energy is a tax on some of our most vulnerable – this change will stop that.
“It’s even more important at a time Brits are faced with high energy costs and when we’ve seen vulnerable households wrongly forced onto them.
“While actions I’ve pushed for have meant forced installations are on pause, warrants aren’t being waved through and Ofgem is toughening up its reviews, our changes will make sure families aren’t penalised simply for how they heat their home.”
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The Energy Price Guarantee has been designed to protect customers from increases in energy costs.
This is done by limiting the amount suppliers are able to charge per unit of energy used.
At present, the guarantee brings a typical household energy bill in Great Britain for dual-fuel gas and electric down to above £2,500 per year.
Recently, one expert said it is a “no brainer” for Mr Hunt to extend the guarantee for a few more months in his upcoming Budget.
Laura Suter, head of personal finance at AJ Bell, said: “The plan to make the Energy Price Guarantee less generous in April at the same time as the Government stops the monthly rebate we’ve all been getting off our bills would have landed the average household with an extra £900 on their annual fuel bills in one swipe.
“While the move will protect average households from an extra £500 on their annual bills, energy bills will still cost us all more.
“The £400 off bills the Government has been dishing out this winter, to the tune of around £66 a month, will still end in April.
“At the same time, the cost of living support payments for those on certain benefits is less generous this year than it was last year – which all adds up to bigger bills.”
From April 2024, Ofgem will now need to report back on additional regulatory options to end the premium on prepayment meters, and bring fairness to bill payment methods.
The Government states the average energy bill for families was cut by £1,300 this winter.