The terms ‘Energy Price Cap’ and ‘Energy Price Guarantee’ appear almost daily on the news and social media. They seem very important but, unfortunately, these phrases are not well explained, and many people don’t understand what they are and what this means for them. This blog will help clarify these terms, allowing you to better understand the current situation and manage your bills better.
What is the Energy Price Cap (EPC)?
The EPC was introduced by Ofgem (the Office of Gas and Electricity Markets) in January 2019. Its aim was to prevent households on variable tariffs being overcharged by limiting what you pay for each unit of gas and electricity. It also sets a maximum daily standing charge (the fare you pay to be connected to the grid).
The EPC is largely calculated off wholesale prices (those that suppliers pay), network costs (building and maintaining the network) and supplier operating costs. It applies to households on standard and default tariffs which the majority of people are now on. If you are unsure what sort of tariff you are on, consult your energy provider.
Myth: The Energy Price Cap is the maximum you can pay per year.
Fact: There is no maximum charge for an energy bill, just a maximum daily standing charge & cost per energy unit. The price given by EPG and EPC is the average amount a household will spend per year.
What is the Energy Price Guarantee (EPG)?
As a result of very high energy prices, the EPG was created by the government in October 2022. This provides a discount on the EPC as the government is subsidising the cost of energy. For example, between 1st January and 31st March the energy price cap is £4,279/year however with EPG discount, this is reduced to £2,500/yr.
The EPC changes every 3 months, and each time it changes, the government provides a discount to keep typical household bills lower. If the energy price cap falls below the EPG in the future, the EPC will be reinstated, and you’ll pay this instead.
What does this mean for my household?
As of January 2023, a household with a ‘normal’ amount of energy use would pay the EPG of £2,500/year. This is set to rise in April to £3,000 a year and will remain at this level until the end of March 2024. This is much lower than what the costs should have been for this winter but higher than previous years.
The government has also given all households a £400 energy bills discount in October 2022. This should have been paid to you in 6 instalments taking £66 off your energy bills each month. If you use a bills package like UniHomes or Fused you should receive the discount from them as a reduction in your bills. If you pay your bills to your landlord, they are legally required to make sure you benefit from the rebate.
What should I do if I’m struggling to pay my bills?
If you are worried you may not be able to pay your energy bill, make sure to seek help. There are resources to help you and make sure you are not left cut off. These articles from The Money Saving Expert and Citizen’s Advice have some useful advice about the support available and how to access it.
What if I still have questions?