What does the Spring Budget mean for my energy bills?

Following the massive increase in the cost of wholesale gas prices in 2022 – primarily as a result of the Russian invasion of Ukraine – the temporary Energy Price Guarantee was established by the UK government. Set to run from 1 October 2022 – 31 March 2022, the guarantee meant that energy customers would pay less for their energy than they would have done under the rapidly rising standard Energy Price Cap set by Ofgem, the energy regulator.

The Energy Price Guarantee meant that the energy bill for the typical UK household paying via direct debit would be capped at £2,500 a year until 31 March 2022 (and £1,950 per year for an average household in Northern Ireland where energy costs are calculated separately). An additional winter fuel supplement of £400 was also offered to all households. In comparison, the Ofgem standard price cap would have been £4,279 during this time.

As of 1 April 2022, the Energy Price Guarantee had been due to increase to a cap of £3,000 until April 2024. However, given falling wholesale energy prices in recent months and the high profits seen by energy providers in recent years, campaigners called on the government to do more to support people with their energy bills.

On Wednesday 15 March, the Chancellor, Jeremy Hunt, unveiled his Spring Budget for the 2023-24 financial year. In the Budget, the Chancellor announced that an extension to the current level of government funding towards energy costs will happen for three months. This means that the Energy Price Guarantee cap of £2,500 will remain in place until the end of June 2023, saving the average family around £167.

However, the £400 winter fuel payment will not be repeated, which means many people may still see a short term increase to their energy costs.

In reassuring news though, there have been forecasts of a further fall in gas prices from July 2023 onwards, with energy market analysts predicting a fall in the Ofgem Energy Price Cap to £2,100 for a typical household, making the government’s Energy Price Guarantee redundant as of summer 2023.  Of the planned extension to the Energy Price Guarantee cap, the Chancellor noted:

“…this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”

What can I expect to actually pay for my energy bill this year based on my energy usage?

Of course the Energy Price Guarantee cap refers to the average energy consumption of a ‘typical’ UK household, which means you won’t necessarily be paying £2,500 for you energy this year. Your energy bill is governed by the amount of energy you use, your specific tariff and the way you pay for your energy, since energy providers charge consumers with pre-payment meters more than their counterparts who pay by direct debit to cover the costs of managing the meters.

Where you live in the UK will also dictate the cost of your energy, since the maximum rates that Ofgem say energy providers can charge consumers also takes into account the cost of transporting the gas and electricity across the UK. This means that for a variety of reasons, some households will pay less than £2,500 and some will pay more, although as part of the Budget the government also pledged to bring prepayment energy charges in line with charges for customers who pay by direct debit. There will also be an end to force-fitted pre-payment meters, with the Energy Security Secretary, Grant Shapps directing Ofgem to undertake a review into the use of prepayment meters.

Typical energy costs per property type and usage

*Prices are based on Energy Price Guarantee rates for customers paying for dual fuel via direct debit. Figures courtesy of the BBC.

How energy efficient is my home?

Of course, the amount of energy you use is also dependent on how energy efficient your home is. Your Energy Performance Certificate (EPC) will tell you the energy efficiency of your home and its carbon emission levels. You should have received an up to date EPC when you purchased your property, or, in the case of renters, before you signed your tenancy agreement.

If you don’t have a copy of your EPC to hand, you can find it on the website for the Ministry of Housing, Communities and Local Government: https://www.gov.uk/find-energy-certificate

If your EPC is no longer valid – if it is over 10 years old or you have made significant changes to your home since an inspection was undertaken for instance – then you can find a list of accredited energy assessors to undertake a new EPC inspection here: https://www.gov.uk/find-an-energy-assessor

Should you be renting your home, it is your Landlord’s legal responsibility to ensure that your home has an EPC rating of E or higher.

For more advice on improving the energy efficiency of your home and saving money on your energy bills, head to the Energy Savings Trust website: https://energysavingtrust.org.uk/