With the rising energy price cap, higher inflation and higher prices at the petrol pumps, many households will really feel the pinch. But it’s energy bills that are worrying people the most.
Energy bills - a 'hot' topic
"I’ve been talking about the cost of energy a lot lately on the BBC, Channel 5 news and other media outlets and our own research into the cost of living shows that energy bills and energy prices are particularly worrying for many people.
So, I wanted to take a closer look at the government help with energy bills and how you can make your money go a little further."
Rising energy bills
Energy bills have risen very sharply in the last year or so and people have fewer options to save money than they would normally have. That’s because it’s difficult, if not impossible, to shop around, as energy companies are generally not taking on new customers or the deals they’re offering may not be competitive.
The Energy Price Guarantee
Energy prices are currently capped by the Energy Price Guarantee, introduced on October 1st 2022. Under the guarantee, a typical household getting gas and electricity from the same supplier, on the standard tariff and paying by direct debit, will pay £2,500 a year for energy. This is a rise of over £500 (or 25%) from the previous energy price cap level of £1,971. Customers on a prepayment meter, or who pay their bill quarterly will pay more.
The Energy Price Guarantee will last at its current level until April 1st 2023. From April, it will be replaced by a new, higher, Energy Price Guarantee, which will last until March 31 2024. And under this price guarantee, a typical household getting gas and electricity from the same supplier, on the standard tariff and paying by direct debit, will pay £3,000 a year for energy. It will apply to homes in England, Scotland and Wales and Northern Ireland, (although Northern Ireland has slightly different regulations covering the price of energy).
Households that don’t use gas, such as those that heat their homes with heating oil, will receive £100 payment in the winter of 2022, which will rise to £200 in 2023.
What the price guarantee means for your energy bill
While the Energy Price Guarantee limits the price of energy, it doesn’t set a limit on your bill. Your energy bill will depend on how much energy you use and how you pay. Paying by direct debit means you pay a lower unit rate (and generally a lower standing charge as well), whereas paying your bill when it arrives or having a prepayment meter are both more expensive.
Because of help already announced by the government in May, the annual energy bill for a typical household is likely to be around £2,100 or less in the winter of 2022. I’ll explain why below.
Help with energy bills
Earlier in 2022, the government promised help towards the sharp rise in the cost of living. One of the main parts of this help was money off your energy bill. All domestic (namely, not business) electricity customers in England, Scotland and Wales are getting a £400 discount on their energy bill from October 2022. You will still get this discount (and any other cost of living help you’re eligible for) as the announcement in September of the Energy Price Guarantee does not change that.
Scam alert: You will not need to apply for the £400 discount and you will not be asked for your bank details in order to get it. If anyone contacts you out of the blue offering you the energy discount payment in return for your bank details, it is probably a scam.
How you will get the £400 discount
The £400 discount will be credited to your account in six instalments if you pay your energy bill by direct debit or quarterly (£66 a month in October and November and £67 from December to March). If you pay your energy bill by prepayment meter, how you receive the discount will depend on the type of prepayment meter you have.
- If you have a smart prepayment meter, you’ll receive the money directly onto your meter in the first week of each month from October to March
- If you have a traditional prepayment meter, you’ll receive a voucher by text message, email or letter. You’ll have to take this voucher to wherever you normally top up your meter to get the discount. Be aware that these vouchers have a 90-day expiry period, so make sure you redeem them or you may lose out.
Electricity customers in Northern Ireland are also due to receive a £400 discount on their energy bills.
Help with the cost of living
You may also be entitled to one or more of the following payments on top of the £400 discount on your energy bill, depending on your situation.
- People over State Pension age: Most people of State Pension age receive the Winter Fuel Payment, but this year pensioners will receive an extra £150 - £300 as a ‘pensioner cost of living payment’. The amount you’ll get depends on your age and whether you live with someone who is also over State Pension age.
- People on a low income (both pensioners and those of working age): They will receive a cost of living payment of £650 if they are on certain benefits. This is split into two payments – one of £326 (paid in July) and one of £324 paid in November 2022. If you’re over State Pension age, you need to be claiming Pension Credit (Guarantee element) to get the cost of living payment. There are several benefits that people of working age can claim in order to qualify for the payment (such as Universal Credit and Working Tax Credit).
- People with disabilities: They will get a one-off £150 payment if they receive one of a range of disability benefits. These include Personal Independence Payment, Disability Living Allowance, and Attendance Allowance (for people over State Pension age).
In addition to the cost of living payments, earlier this year, the government offered people who live in homes in council tax bands A-D £150 off their Council Tax bill. England, Scotland and Wales all ran this scheme along similar lines (but households in Northern Ireland pay rates rather than Council Tax).
You can find more information on cost of living support on the government’s Help for Households website.
Warm Home Discount
The Warm Home Discount is a separate scheme which provides a discount of £150 on your electricity bill for people who qualify. You don’t receive the money as a cash payment, but rather as money off your bill.
You can qualify for the Warm Home Discount if you’re on the guarantee element of Pension Credit (which means you must be over State Pension age and not receive the full State Pension). You can also get the Warm Home Discount if you’re of working age, on a lower income and getting certain benefits. Most energy suppliers are signed up to the scheme, but some companies only offer it to customers who are over State Pension age.
Sarah’s tip: Latest figures show that there’s up to £1.7 billion in Pension Credit that’s not been claimed with one in three people who are entitled to Pension Credit, not receiving it. If you’re entitled to it, not only could it mean a higher weekly income, but you may qualify for additional help, such as towards your rent and Council Tax as well as the cost of living payment and the Warm Home Discount. Pension Credit can be worth over £3,300 a year.
Using less energy
If you can’t pay less for your energy, you may be able to use less by improving the energy efficiency of your home. It doesn’t have to be expensive; for example, you can buy foil-backed panels to put behind your central heating radiator, so you heat the room and not the wall. If you don’t have 270 mm of loft insulation (approximately 10 inches) you could be losing heat, so it’s worth adding more insulation. More expensive options include fitting thermostatic valves to radiators so you can switch off radiators in rooms you’re not using.
Grants and financial help
You may be able to get other financial help with your bills, such as a grant, for example, but it is likely to depend on a range of factors, such as where you live, whether or not you have savings and/or your income. The charity Turn2us has a grant search tool on its website.
If you’re struggling to pay your energy bills, contact your energy provider as they should reach an agreement with you about repaying any arrears. Most energy companies have their own fund which may be able to help if you’re a customer and are in debt with your energy bills.
If you need help with other debts, contact the company you owe money to or a debt advice charity. A debt advice charity will give you free advice about your debts. You can find out how to get free debt help on the MoneyHelper website.
Help with energy bills
The government has promised help towards the costs of the rise in energy bills. All domestic (namely, not business) electricity customers in England, Scotland and Wales will get a £200 rebate off their energy bill in October. This rebate will have to be paid back over five years in £40 instalments, starting in 2023. In Northern Ireland, approximately 280,000 people on certain benefits will get a payment of £200, which does not have to be paid back.
In addition to the £200 rebate, the government is offering people who live in homes in council tax bands A-D £150 off their council tax bill. England, Scotland and Wales will all run this scheme along similar lines. You could receive the payment as early as April if you pay your council tax bill by direct debit.
Warm Home Discount
The Warm Home Discount is a separate scheme which provides a discount of £140 off your electricity bill for people who qualify. You don’t receive the money as a cash payment, but rather as money off your bill.
Sarah’s tip: There’s a list of suppliers offering the Warm Home Discount, and information about who needs to apply, on the Gov.uk website.
You can qualify for the Warm Home Discount if you’re on the guarantee element of Pension Credit (which means you must be over state pension age) or if you’re of working age, on a lower income and get certain benefits. Most suppliers are signed up to the scheme but some companies only offer it to customers who are over state pension age. If your supplier was part of the Warm Home Discount scheme and they’ve gone bust, you will have to apply to the new supplier for the discount.
Latest figures show that there’s approximately £1.8 billion in Pension Credit that’s not been claimed. If you’re entitled to it, not only could it mean a higher weekly income, but it may mean you qualify for the £140 Warm Home Discount.
Using less energy
If you can’t pay less for your energy, you may be able to use less by improving the energy efficiency of your home. It doesn’t have to be expensive; for example, you can buy foil-backed panels to put behind your radiator (or make your own with silver foil), so you heat the room and not the wall! If you don’t have 270 mm of loft insulation (approximately 10 inches) you could be losing heat, so it’s worth adding more insulation. More expensive options include fitting thermostats to radiators so you can control the heat in each room.
Grants and financial help
You may be able to get some financial help with your energy bills, but it is likely to depend on where you live, the type of property you live in (you own it, rent it etc) and your income. There’s a useful, Government backed, website called Simple Energy Advice, where you can type in your postcode, give some information about your home and your situation, and it will tell you what help might be available. The advice is all government endorsed.
If you’re struggling to pay your energy bills, contact your energy provider as they should reach an agreement with you about repaying any arrears. Most energy companies have their own fund which may be able to help if you’re a customer and are in debt with your energy bills. If you need help with other debts, contact the company you owe money to or a debt advice charity. You can find out how to get free debt help on the MoneyHelper website.