Energy Price Guarantee made less generous, rising to £3,000 a year

The Energy Price Guarantee (EPG) became less generous in July 2023, increasing to £3,000 a year¹. The scheme had been announced on 8 September 2022 by the then Prime Minister and introduced on 1 October 2022, capping typical consumption at £2,500 a year and limiting the increase in typical bills to 27% that October¹. The EPG was the government's main measure to reduce the impact of the energy crisis on consumers, with the government setting maximum prices for gas and electricity below those under the existing price cap and compensating suppliers for selling below cap prices².

The change to a less generous level did not raise bills, because the price cap had fallen below it. The price cap for July to September 2023 was £1,766, with unit prices 27% lower than under the EPG for gas and 9% lower for electricity². As its annual level was lower than the EPG, customers on standard variable tariffs saw prices fall for the first time since October 2020². The cap fell further to £1,641 in October 2023 and rose to £1,723 in the first quarter of 2024, both below the EPG, so the mechanism was not needed to set maximum prices again before it ended in March 2024².

The EPG had limited the increase to 27% in October 2022 and meant domestic consumers paid less than they would have under the price cap until July 2023². Record prices in 2022 would have led to an 80% increase in the energy price cap in Great Britain without government intervention². The first major impact on domestic customers on standard variable tariffs had been a 54% increase in the price cap in April 2022².

Energy prices in Northern Ireland are not controlled by the price cap and only a minority of households use mains gas for heating². The government provided support said to be equivalent to the EPG, which resulted in the largest electricity supplier in Northern Ireland cutting prices in November 2022 to below those in the rest of the UK; reduction in this support from April 2023, and its ending from July 2023, led to price rises in Northern Ireland in 2023².

Why it matters for households

The EPG and the price cap are normally expressed as annual figures for dual fuel direct debit customers with typical consumption. Annual bills are not capped: households that use more energy pay more, those which use less pay less, and prices vary by region and are higher for customers paying by quarterly bills². The July 2023 change therefore did not by itself raise the amount a typical household paid, because the price cap had dropped below the £3,000 level and set the maximum instead¹.

The wider period still left bills well above earlier levels. The July to September 2024 price cap was still almost 30% higher than the winter 2021/22 cap¹. Consumer Scotland's Spring 2023 tracker, carried out by YouGov between 2 and 23 March 2023, found 33% of consumers reported not managing well financially, 36% found it difficult to keep up with their energy bills, 50% said they were using less energy than a year earlier and 62% reported rationing energy use because of financial concerns³. Difficulty was highest among those earning under £20,000, at 52%, and disabled people, at 48%³. Ofgem figures cited by Consumer Scotland show domestic energy debt and arrears rose from £1.55bn in the first quarter of 2021 to £2.25bn in the first quarter of 2023³.

What happens next

The EPG ended in March 2024, after the falls in the price cap from July 2023 meant it was not needed again². The price cap fell again in October 2023, April 2024 and July 2024¹. The energy price cap continues to set maximum prices for customers on standard variable tariffs in Great Britain, while energy prices in Northern Ireland follow a separate market without a cap². The Energy Price Guarantee scheme itself has closed.