Martin Lewis has shared 15 need-to-knows for all domestic energy customers following the announcement from new Prime Minister, Liz Truss, that energy bills for the average household will be frozen at no more than £2,500 for the next two years.
The Prime Minister’s two-year plan will save the average household around £1,000 from October and protect billpayers from further expected rises over the coming months. For businesses and other non-domestic users such as schools and hospitals, which have not been covered by the existing price cap, a six-month scheme will offer equivalent support.
Posting on Twitter, to his 1.7 million followers, the consumer champion shared a “very quickly bashed out summary of the new energy price freeze” and also confirmed that the final point for people who have already fixed their tariff was not addressed by Liz Truss, but was said directly to him by Secretary of State for Business, Jacob Rees-Mogg.
Martin posted: “Point 15 of this has not been said in parliament, but I've been told this directly by the Secretary of State for Business as its what I was arguing for.
"Those on fixes, can either stay on them, or can leave and switch to the new state subsidised tariffs with no exit penalties."
Martin Lewis Energy Price Guarantee need-to-knows
Martin explained:
- The new price guarantee of £2,500 for two years will start on October 1
- The current price cap is £1,971 per year for households on typical use and was due to rise to £3,549 from October 1
- This will be a cap on standing charges and unit rates - use less and you will pay less, use less you pay more - there is no total cap on what you pay. Martin advised he will publish more on this when he has the figures
- The new lower price cap includes getting rid of the green levies
- The £400 payment to all homes - a monthly discount of £66 and £67 will start from October as planned
- The monthly reduction from October takes the annual bill to £2,100 per year
- To estimate what you'll pay, over a year, Martin suggests multiplying your current costs by 6.5% (each £100 becomes £106.50) this includes the £400 discount (but not other payments)
- For those with lower than typical bills, the percentage increase will be lower, for higher users higher
Martin explained; “As the £400 payment is flat regardless of use, so has a bigger proportionate reduction on lower usage.”
- The £650 cost of living payments to those on many benefits will continue
- The £150 cost of living payment to those with disabilities and £300 to pensioners will also continue
Martin commented: “ There's no announcement on whether these payments will be in place next winter, I suspect the political reality is at least for benefits recipients, similar will be paid next year.”
- VAT is not being reduced in this announcement, but there is a chance that it may happen in the Chancellor's fiscal statement next week
- For those on (Liquified Petroleum Gas) and heating oil Liz Truss announced there would also be additional financial support.
Martin said: “I'm told there will be discretionary payments to help them too (awaiting details).
“ For those in park homes and who pay landlords directly, l'm told they should benefit from the new business help (awaiting details)"
- Those on a fixed tariff can either stay on them, or leave and switch to the new state subsidised tariffs with no exit penalties
Liz Truss also announced there will be ongoing support for the most vulnerable industries, with a review in three months’ time to decide where the help should be targeted.
The plan will see the UK Government limit the price suppliers can charge customers for units of gas, replacing the existing price cap set by regulator Ofgem.
Using tens of billions of extra borrowing, the UK Government will provide energy suppliers with the difference between the new, lower price and what they would charge were this not in place.
The £2,500 ‘energy price guarantee’ will apply in Scotland, England and Wales from October 1, with the same level of support made available to Northern Ireland, which has a separate energy market.
Responding to the UK Government energy price cap plan, Citizens Advice Scotland Social Justice spokesperson Stephanie Millar said: “Capping energy costs for consumers for two years is welcome and the kind of broad and big intervention that we have been calling for, but it is important to understand this will not end the crisis, and many people will still face horrific spending choices this winter.
“Even with this intervention, bills in October 2022 will be around £1,000 higher than a year ago.
“One in three people already found those bills unaffordable. Meanwhile half a million people in Scotland have no money left after covering the essentials. With inflation and interest rates remaining high people will really struggle, particularly those on low or insecure incomes.
“That’s why we need to see further action – including targeted support for the most vulnerable by boosting Universal Credit, and more support for advice services like CABs that help people through this crisis.”
Morgan Vine, Head of Policy and Influencing at Independent Age, said: “Today’s announcement will provide some much-needed breathing space to older people struggling with their energy bills. Before today’s announcement callers to the Independent Age helpline were extremely anxious about their financial situation, with many being forced to cut back on both food and heating.
“But it is only one piece of the puzzle. Tough choices will still need to be made because sadly, rising energy bills are not the only major concern for those in later life. Food prices and other costs are skyrocketing which is also severely impacting millions of older people.
“Research shows that before the cost of living crisis took hold, poverty among older people was rising, with 2.1 million people aged 65 and over living in poverty. This number will now be higher. We are not out of the woods yet, and we won’t be until all older people can live with financial security.
“More must be done to support older people living in, or on the edge of, poverty. The critical thing in the next two years is that the triple lock must be maintained and uprated with inflation, alongside the uprating of Pension Credit.”
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