Cold comfort on energy bills for years – but there is help for some

Chancellor of the Exchequer Jeremy Hunt has made it clear that the government will not continue to subsidize household energy bills indefinitely. He pointed out in his budget statement on Thursday that the cost of providing such aid is equivalent to that of funding the NHS.

As Putin’s war in Ukraine continues and wholesale energy prices continue to skyrocket, it is clear that households could face exorbitant gas and electricity bills in the coming years.

What help is available now and what financial help can households expect in the future? Last week’s Budget gave some clear indications of what is in store.

Energy bills will rise from April, when available government support will be significantly reduced.

Due to the current energy price cap, households pay an average of £2,500 a year for gas and electricity. If it weren’t for the cap, we’d be paying nearly £1,000 more.

But from April, the limit rises to £3,000 for the next 12 months. In addition, this year’s energy support scheme – which amounts to a payment of £400 towards each household’s bills – will not be extended next year.

Households on means tested benefits will receive an additional payment of £900 next year to help cope with the high cost of living.

Those who use the most can pay more

The energy price ceiling could also be adjusted again sometime after April, so that those who consume very large amounts of energy receive more limited subsidies. For example, households with heated swimming pools may have to pay even more for their energy.

The cabinet will investigate how to ensure that homes that use a lot of energy for medical reasons are not endangered.

Help for off-grid households

Households not connected to the gas grid will get £200 towards their bills this winter – double the amount previously promised.

Those who heat their home with oil, LPG and biomass boilers receive the compensation through their electricity supplier.

The government is considering introducing social rates from April 2024. This would likely amount to cheaper energy deals for lowest income households.

Support to reduce energy bills

The government is stepping in to help with rising energy costs. But Hunt warned that that is unsustainable in the long run. He said: “There is only one way to avoid being at the mercy of international gas prices: energy independence combined with energy efficiency.”

Hunt announced an acceleration of the program to switch to renewable energy, including the construction of the new nuclear power station at Sizewell C in Suffolk.

He also announced a further £6.6 billion in funding from 2025 to 2028 to improve the energy efficiency of homes and other buildings. Hunt said the reduction in demand due to greater energy efficiency would save the equivalent of £450 off average annual household energy bills.

Details of how households will access the financing have yet to be announced. Further details have been promised by the newly formed Energy Efficiency Taskforce. Industry insiders expect the funding will be used to expand an existing scheme called the Energy Company Obligation (ECO), which some households already have access to for help with energy efficiency measures.

Mike Foster, CEO of the Energy and Utilities Alliance, says: ‘The ECO scheme is likely to be expanded to not only benefit low-income people living in the least insulated homes.’

He adds that some households may want to hold off on improving their energy efficiency, hoping to benefit from government funding that may be announced in the future. ‘Anyone who does keep it up, however, misses out on the savings that he could realize in the meantime on his energy bill,’ he notes.

You can check your eligibility for existing support to improve the energy efficiency of your home at gov.uk/improve-energy-efficiency.

Industry association Energy UK has welcomed the new funding announcement but called for it to be made accessible sooner so households can benefit now as they already struggle with extreme bills.

Louise Shooter, Energy UK’s policy manager, says: ‘We understand there are restrictions on materials and labour, but we are urging the government to put some of the funding into this parliament.’