Energy Price Guarantee: is it ending and what will that mean for your family?

The Energy Price Guarantee was announced back in September 2022 by then Prime Minister Liz Truss, and was set to rise in April 2023, but it has now been confirmed that won't happen. Instead the price guarantee will be extended at it's current level until June.

The Energy Price Guarantee was introduced by the government to help families cope with spiralling energy bills.  Soaring energy prices have left millions of families increasingly worried about how much their energy bills will cost and how they will afford them. There's also been lots of change that has caused major price cap confusion.

Money saving expert Martin Lewis has been urging the government to postpone raising the Price Guarantee to £3,000, and the Treasury confirmed that the guarantee would not rise in April as planned. 

Prime Minister Rishi Sunak said: "We know people are worried about their bills rising in April, so to give people some peace of mind, we’re keeping the Energy Price Guarantee at its current level until the summer when gas prices are expected to fall.

"Continuing to hold down energy bills is part of our plan to help hardworking families with the cost of living and halve inflation this year."

What does the Energy Price Guarantee mean for your bills? 

Until the end of June 2023, the Energy Price Guarantee has effectively replaced Ofgem's energy price cap, and set a limit on the price you pay per unit of gas and electricity. The current price guarantee of £2,500 is significantly less than the current energy price cap, which is £3,280. This is what the average household, using a typical amount of energy would pay each year, had the price guarantee not been introduced.

The Energy Price Guarantee was due to rise to £3,000 from April 2023. But as the underlying energy price cap is forecast to drop below the price guarantee's current level of £2,500 In July (£2,053 is the latest July cap prediction), this was scrapped. 

Bear in mind that the figures stated refer to average annual bills based on typical use. If you use more energy, you may end up paying more, if you use less, your bill could be lower.

You will also likely pay more if you have a prepayment meter or if you pay by cash or cheque as opposed to direct debit. However, families with prepayment meters will see their bills brought inline with those who pay by direct debit from July 2023.

If you're not quite sure what the information on your energy bill means, you're not alone - check out our guide if you need your energy bills explained.

What will happen to the Energy Price Guarantee in July?

The price guarantee will end in July and the energy price cap will be used to calculate your energy bill (if you are on your supplier's standard variable tariff). 

Since the price guarantee was introduced, it has been lower than the price cap. The price cap has been demonstrating what our energy suppliers have been paying to buy the energy they sell to us. Where families have been paying the prices set out in the price guarantee, the government has been making up the difference between what we've been paying and what our suppliers have been paying. 

Now that wholesale prices are predicted to drop lower than £2,500, there's no need for the price guarantee any more. 

The energy price cap will continue to be reviewed every three months so that any further price drops can be passed on to households as quickly as possible. We find out on 25 May what the July price cap will be. It will then be reviewed again later in the summer with the next changes coming into effect in October.

 What happens if I still can’t afford my energy bills? 

Despite energy prices dropping, they are still more expensive than before the energy crisis started. This means that many families will still struggle to afford their energy bills. If you’re struggling, know you’re not alone and help is available.  

• Speak to your current supplier about alternative payment options or whether you can be moved to a cheaper tariff.  
• Ask to be put on the Priority Services Register.  
• Check to see if you are eligible for free gas and electricity vouchers. 
• See if you qualify for any help from the Government. 

In a bid to offer support to those most in need, an additional cost of living payment of £900 will be provided to households on means-tested benefits in the 2023/24 tax year (which runs from 6th April 2023 to 5th April 2024). Another £300 will go to pensioner households and £150 to individuals on disability benefits.