Energy loan: Eligibility, can you decline – the key things to know | Personal Finance | Finance
With slight regional variation, the energy bill price cap in the UK was increased by 54 percent as of April 1, with predictions to only increase a further 24 percent in October. This price hike has left households across the country to see bills rising around £700 from now and September.
To help households tackle these spiralling costs, the Government announced a package of support worth £9.1 billion from 2022 to 2023, which includes the Energy Bills Support Scheme.
Through the scheme, domestic electricity customers in Great Britain will receive a £200 reduction in their electricity costs from October.
To make the scheme work, the Government will give money directly to energy firms, who will then apply this as a reduction to bills.
However, this reduction takes shape as a compulsory loan that all who receive will have to pay back over the course of five years.
Here are the key things you should know about the loan.
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Who will receive the loan?
Domestic electricity customers in Great Britain will receive the £200 reduction in their energy costs from this October.
Customers across England, Scotland, and Wales will be eligible for the loan, however, Northern Ireland will be separately funded to provide comparable support with around £150 million through the Barnett formula in the financial year 2022 to 2023.
You cannot opt out of the loan. The Government has said it expects electricity suppliers to apply the reduction automatically to bills from October 2022, but more is currently being done to design the delivery of the scheme to ensure this.
The discount will be automatically applied to energy bills as of October 2022.
If you switch energy suppliers over the five-year repayment period, you will repay any outstanding cash to your new energy firm instead.
Many have questioned the language used to describe the scheme, as many are understandably opposing the term ‘grant’ in regard to its context.
MoneySavingExpert’s Martin Lewis described the scheme as a ‘loan-not-loan’, however, the Government insists it is not a ‘loan’.
This is because “there will be no interest due, no debt attached, and it will not affect your credit rating. It is a grant now with a levy on future billpayers.”
When will the final details and design of the scheme be announced?
The scheme’s official consultation was launched on April 11, where the Government sought views from energy suppliers, industry, and consumer groups, on the best method of delivery.
The fundamental elements of the scheme announced in February have now been fixed, and the Government are currently working to design the detail of the scheme.
This consultation will run until May 23, 2022, with the finalised details expected to be published in the Summer.
