The Government has announced a wide-ranging and costly energy bills rescue package, called the Energy Price Guarantee, to protect households from the worst of price rises this winter.

Energy bills were set to rise by about 80% in October, having already soared in previous updates to the price cap by energy regulator Ofgem.

Instead, the Government has moved to limit that increase.

How will my bills change?

Energy bills will still likely rise for households, but the worst effects have been dampened by the rescue package.

For a typical household, the annual bill for energy will come in at around £2,500 from 1st October. This is however not a hard limit on energy costs.

The way the cap works is as a limit on the price you pay per kilowatt hour (kWh) of gas and electricity. If you continue to use a lot of kWh to heat and power your home, your bills can still come in higher than the £2,500 ‘cap.’

With the way the cap is structured, there is still an incentive for households to conserve the amount of energy they use as this will still reflect in their monthly bills.

If you’re keen on cutting your usage and therefore bills, it’s really important to submit regular meter readings to your provider and speak to them if you believe your direct debits or other payments are set too high.

The guaranteed level was initially set to last for two years. But thanks to market disruption caused by Government spending plans, the new Chancellor Jeremy Hunt rolled the scheme back to just six months. Hunt has committed to review and update the scheme from April 2023, but it is unclear how the scheme will change at that point.

In terms of how much it will cost the Government, little concrete information is known as it is completely reliant on the market price of energy in the next six months.

Estimates range from £60 billion to around £120 billion, depending on what happens to the price of natural gas. Once the Energy Price Guarantee expires, bills are expected to rise again to around £4,347 per year.

Other help

There is still other help being made available to households through measures previously announced by former Chancellor Rishi Sunak.

This comes in the form of an energy bill discount which will be paid to households from October. This is worth £400 and will be paid monthly over winter automatically to bill payers. There is no need to apply as it will be directly applied and is a universal payment.

The Government is also providing cost-of-living payments to households on means tested benefits, which includes Universal Credit, Pension Credit and Tax Credits. Those households will receive a £650 payment this year, made in two instalments.

Those on disability benefits will also receive a payment of £150, but if you’re eligible for this, it likely already arrived in September.

Older people can also claim the Winter Fuel Payment – which will pay between £250 and £600 depending on your circumstances. Those who receive State Pension or other social security benefits (not including Adult Disability Payment from the Scottish Government, Housing Benefit, Council Tax Reduction, Child Benefit or Universal Credit) will receive the help automatically.

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