Liz Truss unveils new energy price guarantee in lifeline to struggling Britons | Personal Finance | Finance
The Prime Minister announced the plan in the House of Commons today. A typical household will pay no more than £2,500 per year for each of the next two years. It is estimated that this decision could save typical households £1,000 on their energy bills a year.
As part of Liz Truss’ energy price guarantee, an average bill for a typical household will be no more than £2,500 a year for the next two years.
This will be implemented from October 1, the same day Ofgem was due to increase the energy price cap to £3,549 for those on typical use.
It should be noted the £2,500 takes account of the removal of green levies which are worth around £150 per home and will exceed the existing price cap.
During her speech, Liz Truss rebuked calls for a windfall tax as part of funding for her wider support package.
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The new guarantee will apply for all households in Great Britain, with the same level of support also being made available to households in Northern Ireland.
Alongside today’s announcement, the Government has clarified it will rollout similar support for business, charities and public sector organisations.
A similar scheme offering an equivalent guarantee for six months will be made available to these groups.
Despite this latest wave of support, some financial experts believe this is a “short-term” fix to address the energy bill crisis.
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Consumer champion Will Hodson explained: “Whilst this package supports the most vulnerable homes, it is only a short-term fix and does not get to the root of the problem. Britain has the oldest housing stock in Europe, which means too much heat lost to poor insulation. If the government does not help British homes increase their energy efficiency now, bill support may be necessary for many years to come.
“Liz Truss has already promised to follow through on the promises of the Conservatives 2019 manifesto, which includes over £9billion worth of investment in energy efficiency. Now she is Prime Minister, she must keep her word. We need a National Insulation Scheme to bring down bills permanently. Every year this investment is postponed puts extra billions on our bills.”
Gareth Kloet, an energy spokesperson for Go.Compare Energy, added: “Today’s announcement will undoubtedly provide some relief for bill payers across the UK – the eye-watering price cap increase – from £1,971 to £3,549 – that was due to come into force on October 1 was untenable and action needed to happen.
“While this announcement will offer some respite for people across the UK, these plans will still result in customers paying more and many people in the UK facing fuel poverty this winter. We have to remember that millions of families are still facing energy bills of £2,500 which is an extortionate amount to pay for energy.”
Energy price cap explained:
The energy price cap outlines the maximum amount suppliers can charge consumers for each unit of energy they use.
Last month, the energy regulator Ofgem announced the price cap would rise from £1,971 to £3,549, based on typical use, from October.
This is a staggering increase of 80 percent and comes amid inflation-hiked prices which are continuing to push families into poverty.
Under the increase, monthly energy bill charges, for someone on typical use, would be set to rise by £500 a month and households on prepayment metres will experience a £714 hike.
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Research carried out by Cornwall Insights forecasts that the energy price cap could soar to £5,386 in January 2023, and £6,163 by April.
Ahead of the pending price cap rise, many households moved to fixed-rate deals to weather the economic storm in the coming months.
However, families on a fixed-rate may have to pay a higher amount towards their energy bills than they would have had to with standard variable tariffs once the price cap plan is implemented.
It should be noted that those on a fixed-rate deal are able to leave their contract early unlike other supplier offerings. However, families in this situation could face exit fees of up to £300 if they choose to do this.
What other energy bill support is available?
Under previous Prime Minister Boris Johnson’s Government, a sizeable financial support package was rolled out to help those in need.
This included a £650 cost of living payment for those on means-tested benefits, a £300 lump sum for pensioners and £150 for those with a disability.
Notably, every household will be eligible for a £400 grant which will go towards their energy bills.
Due to the continuous rise in energy price forecasts, the recently-announced bill plan is being rolled out to offer further support.
