'This first of the month brings an extra pinch and a punch' - ITV News Correspondent Ian Woods reports on the introduction of the new energy price cap
The new energy price cap to shield households and businesses from the worst of the impact of soaring oil and gas prices has come into effect.
Under the energy price guarantee, which limits the unit price paid for electricity and gas, the annual bill for a typical household in England, Scotland and Wales will be held to around £2,500 for the next two years.
A similar scheme will operate in Northern Ireland.
The government has said that without action, energy bills had been expected to hit £3,500 from October rising as high as £6,500 next year.
But the £2,500 cap does not mean that no households will have to pay more than that in energy bills.
Adam Scorer, chief executive of fuel poverty charity National Energy Action, said: “It’s simply not true that bills are capped at £2,500 and it’s vital that people understand that.
“The energy price guarantee is not an all-you-can-heat buffet. If you use more, you will pay more.
“Millions on tight budgets do not fit the ‘average’ tag. They can use more energy than the average because they’ve got medical conditions, larger families or really difficult-to-heat homes. They may face bills much higher than £2,500.”
Households will also see the first instalment of the £400 energy bill support scheme in their October electricity bill. The discount will be automatically applied monthly in six instalments between October and March 2023.
Support has also been unveiled for businesses to help them tackle soaring energy bills.
The new Energy Bill Relief Scheme has been described as a "lifeline" for businesses facing a desperate winter amid unprecedented rises in energy costs.
Wholesale energy costs will be capped at "less than half" for all non-domestic customers under the scheme and will apply from October 1, continuing until the end of March 2023.
The wholesale cost of gas and electricity will be slashed for companies under the scheme, with the government picking up half the costs, capping the wholesale price paid by non-domestic customers, which include schools and charities.
The “supported wholesale price” is expected to be £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.
Organisations which signed fixed-price energy deals on or before April 1 this year will see the wholesale part of their bill capped automatically. Those who entered new fixed-price contracts after October 1 will get the same support.
Companies on default, deemed or variable tariffs will be given a per-unit discount, but the amount of support they can get is limited.
This means that if the price on wholesale gas and electricity markets keeps soaring, their bills will go beyond those on fixed-price deals.
The government said it is working with suppliers to ensure they offer businesses the opportunity to switch to a fixed contract.
Liz Truss said: “Livelihoods and businesses were at stake. The Government’s energy support limits the price they pay for gas and electricity, shields them from massive bill increases, and is expected to curb inflation too. “The cost of not acting would have been enormous.”
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