Energy Price Guarantee scaled back from April 2023

The Energy Price Guarantee is being scaled back from April, capping typical household energy bills at £3,000, rather than £2,500¹. The change forms part of a wider package of support for households in 2023/24 announced in the 17 November 2022 Autumn Statement¹. The Resolution Foundation described the guarantee as "now only capping the typical bill at £3,000 from next April"².

The Social Security (Additional Payments) (No. 2) Bill 2022-23, introduced to the House of Commons on 7 February 2023, provides for two Cost of Living Payments announced in that Autumn Statement¹. These are a £900 Cost of Living Payment, referred to in the Bill as "means-tested additional payments", paid in three instalments to recipients of certain means-tested benefits including Universal Credit, most of the legacy benefits and tax credits it is replacing (except Housing Benefit), and Pension Credit; and a £150 Disability Cost of Living Payment, referred to in the Bill as "disability additional payments", for recipients of certain non-means-tested disability benefits including Personal Independence Payment (PIP), Disability Living Allowance (DLA), Attendance Allowance (AA), and corresponding devolved Scottish disability benefits¹. The Government also announced £300 Pensioner Cost of Living Payments and further funding for discretionary support through the Household Support Fund, which do not require new primary legislation¹. The Bill's territorial extent and application covers England and Wales, Scotland, and Northern Ireland¹.

Cost of Living Payments were estimated to cost £8.8 billion in 2022/23 and are expected to total over £11 billion in 2023/24¹. In 2023/24, over 8 million households are expected to receive a means-tested benefit Cost of Living Payment, 6.7 million disabled people will receive a Disability Cost of Living Payment, and 11.7 million pensioners will receive an uplift to their Winter Fuel Payment¹. The further £1 billion for the Household Support Fund and for the devolved administrations for 2023/24 is the same in cash terms as the amount allocated in 2022/23¹.

The annual rate of Consumer Price Inflation reached a peak of 11.1% in October 2022, a 41-year high, and CPI inflation was 10.1% in January 2023¹. The Resolution Foundation said benefits would rise in line with prices, or 10.1 per cent in April, and that the benefit cap was also being increased by 10.1 per cent². The National Living Wage was set to rise from £9.50 to £10.42 next April².

Which? reported that the Spring Budget 2023 kept the Energy Price Guarantee at £2,500 for an average household between April and June, instead of increasing to £3,000, and that from July industry forecasters expected the Ofgem price cap to fall below £2,500 for the remainder of the year³. It also reported that the Budget confirmed prepayment meter prices would be the same as direct debit prices from April 2023 onwards³. The Chancellor did not announce a repeat of the Energy Bill Support Scheme next winter in the Spring 2023 budget³.

Why it matters for households

The guarantee limits the amount that can be charged per unit of gas or electricity⁴. Under the scaled-back guarantee, a typical household bill is capped at £3,000 from April 2023¹. Which? estimated a median-usage household would pay £135 more in the 2023/24 financial year than in 2022/23, with an annual bill rising from £1,983 to £2,118, because the fall in prices was not enough to make up for the ending of the £400 Energy Bill Support Scheme³. It estimated the average household in the lowest 10% of incomes would pay £209 more in 2023/24 than in 2022/23³.

The Resolution Foundation said around one-in-eight families (3.3 million) would be paying over £2,000 more next year than they were in 2021-22 for energy, and that the OBR expected household incomes to fall by just over 7 per cent over this year and next, the equivalent of £1,700 per household². The Resolution Foundation's Living Standards Outlook 2023 said the typical after housing costs income of non-pensioner households was set to fall by 3 per cent in 2022-23 and by 4 per cent in 2023-24⁵.

The Commons Library noted that the way benefits are uprated means the real value of benefits has lagged behind prices during higher inflation, and that in both 2022/23 and 2023/24 the uprating process has left benefit levels, excluding Cost of Living Payments, lower in real terms than before the inflationary spike, a situation lasting at least until April 2024¹. It also noted concern that certain groups may miss out on means-tested benefit Cost of Living Payments, including low-income households not receiving means-tested benefits, those getting Housing Benefit and no other qualifying benefit, and claimants who get a nil award of Universal Credit during the qualifying period¹.

What happens next

The Energy Price Guarantee is capped at £3,000 from April 2023¹. Which? reported that from July, industry forecasters expected the Ofgem price cap to fall below £2,500 for the remainder of the year³. The Resolution Foundation said that from July, households would pay the lower of the Ofgem Price Cap or the £3,000 typical EPG until the end of March 2024⁴. The Bill allows the Secretary of State, through regulations, to set qualifying dates for the payments¹.