The Energy Bill Relief Scheme, which subsidised wholesale electricity and gas prices for businesses, charities and public sector organisations, ends on 31 March 2023. It will be replaced from April by the Energy Bills Discount Scheme, which the government says will offer "universal support albeit at a reduced rate to protect the public finances"1. The Department for Business, Energy and Industrial Strategy said £3 billion had been cut from business energy bills in just over three months under the outgoing scheme1.
For households, the change coincides with the end of the £400 Energy Bills Support Scheme discount, which the Welsh Government said was "a lifeline for vulnerable households" and is "ending in April"2. The Scottish Government said the same scheme is "being withdrawn from 1 April"3. The Energy Price Guarantee, which caps the unit cost of electricity and gas for domestic customers, continues. Ofgem said the government has set it at £3,000 for a typical bill from 1 April, meaning consumers "will not pay the full level of the energy price cap"4. Ofgem's letter to market participants states the guarantee is expected to increase from £2,500 to £3,000 for a typical dual fuel direct debit consumer and will be extended until April 20245.
The underlying price cap, which applies if the guarantee were not in place, falls from 1 April. Ofgem set it at £3,280 a year for a typical dual fuel household paying by direct debit for the period 1 April to 30 June 2023, down from £4,279, a reduction of almost £1,0004. Ofgem's letter gives the level for other payment methods5:
| Payment method | 1 Jan to 31 Mar 2023 | 1 Apr to 30 Jun 2023 |
|---|---|---|
| Direct debit | £3,549 | £3,280 |
| Standard credit | £3,764 | £3,482 |
| Prepayment | £3,608 | £3,325 |
| Economy 7 (direct debit, 4,200 kWh) | £2,988 | £2,282 |
Ofgem chief executive Jonathan Brearley said the cap had not yet fallen below the planned level of the guarantee, so "on current policy, bills will rise again in April"4. The Welsh Government said a typical household would be paying £400 more for energy from April2. The Scottish Government said it would triple its Fuel Insecurity Fund from £10 million to £30 million for 2023-24, up from a previously committed £20 million, to help households "at risk of self-rationing or self-disconnecting their energy use"3.
"This will then be replaced by the Energy Bills Discount Scheme from April, which will offer universal support albeit at a reduced rate to protect the public finances."
Why it matters for households
The support that has held down domestic bills through winter 2022-23 is being withdrawn or reduced in stages. The £400 discount ends, the guarantee rises to £3,000, and the non-domestic relief that supported many employers, charities and public services ends. The lower underlying price cap does not offset this for a typical household, because the guarantee sits below it. For a home's energy independence, the practical position is that unit costs remain far above historic norms: Ofgem's letter notes wholesale gas and power prices are still two to three times their historic average5. Households off the gas grid received £200 through the Alternative Fuel Payment, doubled in the Autumn Statement, with most paid automatically as a credit and a minority applying through a gov.uk portal1. The Welsh Government said energy bills in Wales are higher because of the age of the housing stock and "extremely high standing charges"2. Ofgem said it sees a case for examining "with urgency the feasibility of a social tariff for customers in the most vulnerable situations"4.
What happens next
Ofgem's next quarterly price cap update is due on 25 May 20234. The Energy Price Guarantee is expected to run until April 20245. The Scottish Fuel Insecurity Fund money will be made available to third sector organisations in the next financial year3. The Welsh Government said that from 1 April 2023 it will move to one set of rules for all Emergency Assistance Payments, uplifting each award by 11%2.
Sources5 cited
- Households, businesses and organisations off the gas grid to receive energy bill support over the coming weeks - GOV.UK, gov.uk
- Written Statement: Cost of Living - Energy Crisis (28 March 2023) | GOV.WALES, gov.wales
- More funding made available for Fuel Insecurity Fund - gov.scot, gov.scot
- Ofgem announces latest quarterly price cap update | Ofgem, ofgem.gov.uk
- Default Tariff Cap update, ofgem.gov.uk