The Energy Price Guarantee came into effect on 1 October 2022, limiting the amount domestic consumers can be charged per unit of gas and electricity. The government said the scheme would ensure that a typical household in the United Kingdom pays around £2,500 a year on their energy bill, depending on their use, for the next 2 years, from 1 October 20221.
The guarantee was introduced alongside the Energy Prices Bill, brought to Parliament on 12 October 2022, which the government described as providing the legislative footing needed to ensure that people and businesses across the UK receive support with their energy bills this winter1. The same announcement said energy bills had been estimated to increase to as high as £6,500 before the government stepped in1.
"The Energy Price Guarantee will ensure that a typical household in the United Kingdom pays around £2,500 a year on their energy bill, depending on their use, for the next 2 years, from 1 October 2022."
The guarantee sets maximum prices, not maximum bills. Ofgem stated that the amount an individual customer pays under the scheme varies depending on how much energy they use, where they live, and how they pay for their energy2. The £2,500 figure is calculated using the typical domestic consumption values of 2,900kWh for electricity and 12,000kWh for gas2.
The guarantee sits alongside the separate Energy Price Cap set by Ofgem, which continued to be published quarterly. Ofgem's cap level for 1 January to 31 March 2023 rose to £4,279 for a dual fuel, direct debit customer, up 21% on the previous period, and Ofgem stated that its figures do not represent what domestic consumers will pay on their bills under the Energy Price Guarantee2. The government also announced up to £1.5 billion through the Social Housing Decarbonisation Fund and Home Upgrade Grant, which it said would upgrade around 130,000 social housing and low-income properties in England, with estimated savings of around £400 to £700 a year at current prices3.
Why it matters for households
The guarantee changed the basis on which a household's bill is calculated. Rather than the price cap alone determining the maximum a supplier could charge, the guarantee reduced the unit cost of gas and electricity, so the headline £2,500 applies to a household using average amounts of both fuels1. A home that uses more, or pays by a method other than direct debit, faces a different total2.
For energy independence, the guarantee is a temporary intervention in the retail market rather than a change to how a home is supplied or heated. The government also set out a Cost-Plus Revenue Limit intended to break the link between high global gas prices and the revenue received by low-carbon electricity generators, planned to apply in England and Wales from the start of 2023, with the Scottish Government still to confirm whether it would extend to Scotland1. The government said the limit differs from a windfall tax as it applies to excess revenues rather than all profits1.
What happens next
The Energy Prices Bill was subject to the standard parliamentary process for emergency legislation1. The Cost-Plus Revenue Limit was to be subject to a consultation launched shortly, ahead of coming into force from the start of 20231. The government said the next allocation round of its Contracts for Difference scheme would launch in 2023 as planned1. Local authorities and social housing providers were to submit bids for the Help to Heat funding and deliver upgrades from early next year until March 20253.