Government sets new £2,500 price cap on energy

The government has set out its plans to save consumers from the worst of the planned energy price rises next month. Under new plans, the price cap has been set at £2,500 a year for the next two years from 1 October, through a new ‘Energy Price Guarantee’ which limits the price suppliers can charge customers for gas.

Green levies will be temporarily removed from household bills, worth around £150.

The moves will save the average household £1,000 a year based on current energy prices from October, says the government. They come in addition to the previously announced £400 energy bills discount for all households, which will remain, bringing costs close to where the current energy price cap.

The new guarantee will apply to households in Great Britain, with the same level of support made available to households in Northern Ireland.

Those households who do not pay direct for mains gas and electricity – such as those living in park homes or on heat networks – will be no worse off and receive support through a new fund.

Prime Minister Liz Truss said: “Decades of short-term thinking on energy has failed to focus enough on securing supply, with Russia’s war in Ukraine exposing the flaws in our energy security and driving bills higher. I’m ending this once and for all.

“I’m acting immediately so people and businesses are supported over the next two years, with a new Energy Price Guarantee, and tackling the root cause of the issues by boosting domestic energy supply.”

A new six-month scheme for businesses and other non-domestic energy users (including charities and public sector organisations like schools) will offer equivalent support to that being provided for consumers.

After this initial six-month scheme, the government will provide ongoing, focused support for vulnerable industries. There will be a review in three months’ time to consider where this should be targeted to make sure those most in need get support.

The government will provide energy suppliers with the difference between this new lower price, and what energy retailers would charge their customers were this not in place. Schemes previously funded by green levies will also continue to be funded during this two-year period to ensure the UK’s investment in home-grown, secure renewable technologies continues.

A new Energy Supply Taskforce has begun negotiations with domestic and international suppliers to agree long-term contracts that reduce the price they charge for energy and increase the security of its supply. The Taskforce and Department for Business, Energy and Industrial Strategy will negotiate with renewable producers to reduce the prices they charge as well.

The government has also said it will:

  • Launch a new oil and gas licensing round, expected to lead to more 100 new licences
  • Lift the moratorium on UK shale gas production
  • Drive forward the acceleration of new sources of energy supply from North Sea oil and gas to clean energy like nuclear, wind and solar
  • Continue progressing up to 24GW of nuclear by 2050
  • Undertake fundamental reforms to the structure and regulation of energy market through recommendations from a new review of the UK Energy Regulation.
  • Launch a review to ensure we are meeting our Net Zero 2050 target in an economically efficient way, given the altered economic landscape. Chaired by Chris Skidmore MP and reporting by the end of this year, it will ensure delivering the target is not placing undue burdens on businesses or consumers.

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