On 8 September 2022 the then Prime Minister Liz Truss announced that a new Energy Price Guarantee (EPG) would be introduced from 1 October, setting maximum prices for gas and electricity below those under the existing price cap1. Under the scheme a typical UK household will pay up to an average £2,500 a year on their energy bill for the next two years, a figure that takes account of temporarily removing green levies worth around £150 from household bills1. The guarantee supersedes the existing energy price cap1.
The government said the guarantee will save the average household at least £1,000 a year based on current energy prices from October, and comes in addition to the announced £400 energy bills discount for all households1. It applies automatically to all households in Great Britain, with the same level of support made available to households in Northern Ireland1. The government will pay energy suppliers the difference between the new lower price and what retailers would otherwise charge1. Households that do not pay directly for mains gas and electricity, such as those in park homes or on heat networks, will receive support through a new fund1.
The announcement followed Ofgem's confirmation on 26 August 2022 that the default tariff cap would rise on 1 October to £3,549 a year for an average dual fuel customer paying by direct debit, and to £3,608 for a prepayment meter customer3. The cap had already increased by 54% in April 2022, to £1,971 for direct debit customers2.
"From 1st October, a new 'Energy Price Guarantee' will mean a typical UK household will now pay up to an average £2,500 a year on their energy bill for the next two years"
The government also set out a six-month scheme for businesses and other non-domestic energy users, including charities and public sector organisations such as schools, offering equivalent support to that provided for consumers, with a review after three months to consider where support should be targeted1. Alongside the guarantee it announced measures on supply, including a new oil and gas licensing round expected to lead to over 100 new licences, lifting the moratorium on UK shale gas production, and a new Energy Supply Taskforce to negotiate long-term contracts with domestic and international suppliers1.
The £2,500 figure is an estimate for typical consumption, not a cap on a household's total bill. Ofgem and the Department for Energy Security and Net Zero make estimates about the amount of energy a typical household consumes, and a household using more energy could pay more than the guarantee level2. The typical household figure is an illustrative annual bill built from capped unit prices and standing charges, and the cap does not cap maximum annual bills2.
Why it matters for households
The guarantee replaced a cap level that had been due to rise by 80% on 1 October, so the immediate effect was to hold the October increase well below what Ofgem had announced2. The government said the package would curb inflation by 4 to 5 points1. The Commons Library later noted that the EPG disproportionately benefited higher income households with higher levels of energy consumption2.
For a household's energy independence, the guarantee changed who carries the risk of wholesale price movements. Suppliers are reimbursed for the difference between the guaranteed price and what they would otherwise charge, so the cost sits with the government rather than being passed through to bills in the short term1. The guarantee limits the price suppliers can charge for units of gas, and green levy schemes continue to be funded by government during the two-year period1.
The support arrived against a backdrop of supplier instability. The Committee of Public Accounts reported on 13 November 2022 that 29 energy suppliers had failed since July 2021, affecting around 4 million households, with customers left to pay a £2.7 billion cost equating to £94 per household4. The committee said its report, based on evidence collected up to July 2022, had in some cases been superseded by events, in particular the announcement of the Energy Price Guarantee4.
What happens next
The guarantee was announced as a two-year measure1. It was subsequently changed: the government announced that the EPG would remain at £2,500 until the end of June 2023 and then increase to £3,000 from July 2023 to March 20242. The then Chancellor Jeremy Hunt announced on 17 October 2022 that the EPG would last only six months, and in the Autumn Statement 2022 said it would rise to £3,000 for typical annual consumption and last to the end of March 20245. The EPG is set to end in 20242. The government said in the 2022 autumn statement that it would take a "new approach to consumer protection from April 2024", working with consumer groups and industry on options including social tariffs, but the Commons Library recorded in October 2023 that this consultation had not been published2.
Sources5 cited
- Government announces Energy Price Guarantee for families and businesses while urgently taking action to reform broken energy market - GOV.UK, gov.uk
- CDP-2023-0202.pdf, researchbriefings.files.parliament.uk
- Subject:, researchbriefings.files.parliament.uk
- Regulation of energy suppliers - Committee of Public Accounts, publications.parliament.uk
- [](https://researchbriefings.files.parliament.uk/documents/CBP-9428/CBP-9428.pdf), researchbriefings.files.parliament.uk