Energy Bills Support Scheme explainer

Energy bills are rising because it is more expensive for the companies who supply our energy to buy oil, coal, and gas. The reasons gas prices are soaring are global – both in global demand for energy from a long cold winter last year and increased demands during the coronavirus (COVID-19) pandemic, and in global supply of energy with the world seeking to end its dependence on Russia oil and gas following their illegal invasion of Ukraine. Over the last year, the price of gas alone has quadrupled. The energy price cap increased in April to take account of these increased prices.

1. What is the Energy Bills Support Scheme?

The government recognises that many households need support to help deal with rising energy bills. That is why it’s providing a package of support worth £9.1 billion in 2022 to 2023 which includes the Energy Bills Support Scheme.

Through the scheme, domestic electricity customers in Great Britain will receive a £200 reduction in their electricity costs from this October. It’s fair to spread the costs of the reduction as widely as possible, so that no-one pays more than £40 per year through the levy. Therefore, all domestic electricity consumers will pay a charge in future years.

2. Will I be eligible for the Energy Bills Support Scheme?

All households with a domestic electricity connection will be automatically eligible for the £200 reduction.

3. Do I need to apply for the support scheme?

Households will not need to apply for the scheme, and in most cases, we expect electricity suppliers to apply the reduction automatically to bills from October 2022.

We are working hard to design the delivery of this and there may be some variations in how you actually receive the benefit, depending on how you pay for your energy, for example whether you pay by direct debit or are on a pre-payment meter. However, if you have a domestic electricity meter you should receive the £200 reduction.

4. Is it a government loan? How are costs recovered?

The energy bill reduction is not a loan. There will be no interest due, no debt attached, and it will not affect your credit rating. It is a grant now with a levy on future bill payers.

The government is taking action to spread the impact of increases in global gas prices in a way that is more manageable for households.

This is a universal measure to help households smooth out the increased costs of energy bills at a time when they are particularly high. The reduction in costs will help people with the increase in energy bills now by spreading some of the costs over a few years, so they are more manageable for households.

5. When will we receive further clarity on the design and delivery of the scheme?

We are working on the specifics of delivery and are actively engaging with energy suppliers, consumer groups and Ofgem to ensure that delivering this reduction and levy are as simple and efficient as possible.

We will launch a consultation shortly to seek views from all areas of society about how best to implement this scheme.

6. Is the scheme UK-wide?

The payment through energy bills will apply across England, Scotland and Wales. Energy policy is devolved in Northern Ireland. The Northern Ireland Executive will be funded to provide comparable support with around £150 million through the Barnett formula in financial year 2022 to 2023.

9. I don’t need this, can I opt-out?

All households with a domestic electricity connection will be automatically eligible for the £200 reduction. The reduction in costs will help people with the increase in energy bills now by spreading some of the costs over a few years, so they are more manageable for households.

In line with our high-level principles, we want to design a scheme that is simple to deliver while maximising the reach of the scheme and ensuring that additional costs are minimised.

10. What if I change payment method or tariff, or if my energy supplier goes bust?

We are still designing the scheme but will ensure that customers who switch payment methods or whose energy suppliers fail, will not be penalised.

11. What if I move house or switch supplier?

All suppliers will be applying the reduction to bills from October 2022. Costs will then be recouped from 2023 over 5 years. The scheme will be based on electricity meter points, so it won’t matter if you switch supplier.

12. This support does not fully cover the increased cost of the energy price cap – why not?

This scheme will help over 28 million households, spreading the increased costs of global energy prices over time in a way that is more manageable for households.

This £200 energy bill reduction is in addition to a non-repayable £150 Council Tax rebate for those in bands A to D and £144 million in discretionary funding for local authorities to support households who are not eligible for the Council Tax reduction.

This means that the majority of households will receive £350 in total, protecting from half of the average forecast bill rise.

This is one of many government support measures adding up to £22 billion in 2022 to 2023 to help families with the cost of living. This includes reducing the Universal Credit taper rate, cutting fuel duty, raising the National Living Wage, freezing alcohol duty and providing targeted help with energy bills for the most vulnerable households.

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