Energy Price Guarantee explained: what is happening with energy prices?
Supply and demand issues in the global wholesale market have increased our energy bills. Because of this the UK government introduced an energy plan called the Energy Price Guarantee (EPG) which replaces the Energy Price Cap.
Understanding the Energy Price Guarantee (EPG) and what our energy bills mean can be confusing. Recent research* has shown that 28% of adults have little or no understanding of how the EPG works. Find out more…
What's on this page?
- What is the Energy Price Cap?
- What is the Energy Price Guarantee?
- How much will I pay for energy with the Energy Price Guarantee?
- What are the current prices per kWh for electricity and gas with the Energy Price Guarantee?
- When will the Energy Price Guarantee change?
- Are my energy costs capped?
- What is a kilowatt hour?
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What is the Energy Price Cap?
The Energy Price Cap was introduced in January 2019 by Ofgem to set a limit on the cost of each unit of gas and electricity used by consumers. Additionally, it sets a maximum standing charge amount. It applies to the standard or default tariffs charged by energy companies.
What is the Energy Price Guarantee?
On 1st October 2022 the UK government introduced the Energy Price Guarantee to help with rising energy costs. It is designed to be a temporary, additional measure to protect consumers from the significant rises in the price of wholesale gas.
The Energy Price Guarantee applies to all households in Great Britain. It will be in place until April 2024, but when the energy price cap drops below the EPG in July you will pay the rate set by the energy price cap.
What does the Energy Price Guarantee mean?
Like the price cap, it limits the amount energy suppliers can charge per unit of energy. It means you will pay less than you would have with the energy price cap alone.
Once the Energy Price Guarantee ends, or when the energy price cap falls below the Energy Price Guarantee, energy prices will be set by Ofgem’s energy price cap. The energy price cap will fall below the Energy Price Guarantee in July 2023.
What is the current Energy Price Guarantee: how much will I pay for energy?
Currently, the Energy Price Guarantee has been calculated so the average household would pay an average of £2500 a year for their energy until 31st March 2023. It was announced in the 2023 Budget on 15th March that the EPG would remain at this rate for three more months from April 1st until the end of June 2023.
From July 2023, prices will be set by Ofgem’s energy price cap. From the 1st July to the 30th September 2023, the cap will be set at an annual level of £2074, for an average household.
The calculation of the average household is based on paying for a gas and electricity bill using direct debit.
Energy usage can vary due to many factors including:
- The number of people in your home
- The size of your home
- How energy efficient your home is
- How energy efficient your appliances are
- If people in the home are being energy efficient
The amount you pay for energy can also vary due to a number of reasons in addition to how much energy you use, including location, payment method and what kind of energy meter you have.
What is the average energy bill in the UK?
Ofgem’s calculation for an average or medium household is based on a 2-3 bedroom house with 2-3 people living in it using 12,000 kilowatt hours (kWh) of gas and 2,900 kWh of electricity a year.
They also estimate what low and high household usage is. Remember, these are average values but can help you get a general idea of how much energy you use and what it might cost you.
Based on the current Ofgem calculations for energy usage, estimated annual costs for energy under the Energy Price Guarantee could be:
|Energy use||Typical home type and residents||Typical annual electricity use (kWh)||Typical annual gas use (kWh)||Average Annual Cost*|
|High||4+ bedroom home 4-5 residents||4,300||17,000||£3,500|
|Medium||2-3 bedroom house 2-3 residents||2,900||12,000||£2,500|
|Low||Flat or 1-bedroom house 1-2 residents||1,800||8,000||£1,700|
*The estimated average annual cost is illustrative and was calculated by the BBC based on current EPG rates and customers paying for duel fuel by direct debit.
What are current gas price and what is the current electricity price per kWh?
The prices as set by the government for the Energy Price Guarantee from 1st October for a customer with typical usage with a default tariff paying by direct debit are:
|Fuel||Price per kWh||Daily standing charge|
Standing charges are designed to cover the cost of supplying your energy with property. They are usually a fixed, daily amount which doesn’t vary.
To find out exactly what you are being charged you should contact your energy supplier.
When will the Energy Price Guarantee change?
The Energy Price Guarantee has been extended in its current form of £2500 for a household with typical energy consumption until the end of June 2023. After that, prices will be set by Ofgem’s energy price cap.
From the 1st July to the 30th September 2023, the cap will be set at an annual level of £2074, for a typical household.
|1st April - 30th June||1st July - 30th September|
|Ofgem price cap||£3280||£2074|
|What an average household will pay (with the Energy Price Guarantee)||£2500||£2074|
What will the new energy price cap be?
From the 1st July 2023 energy prices will be set by the price cap. The new energy price cap for a customer with typical usage with a default tariff paying by direct debit will be:
|Fuel||Price per kWh||Daily standing charge|
For more information about the energy price cap, you can refer to Ofgem’s guide to the energy price cap.
Does this mean my energy costs are capped?
No, both the Energy Price Cap and Energy Price Guarantee limit the price of a unit cost of energy. However, the more units of energy you use, the more you will pay.
What is a kilowatt hour?
A kilowatt hour (kWh) is the standard unit used by energy suppliers to calculate your gas and electricity bill. When you hear energy companies talking about unit costs of energy this is usually referring to the kilowatt hour.
You can understand a kilowatt hour in terms of using 1000 watts of power (a kilowatt) in one hour of time. For example, you’d use 1 kilowatt hour of electricity to power a 100 watt halogen lightbulb for 10 hours, as 100 watts x 10 hours of use = 1000 watt hours or 1 kWh.
If you swapped that halogen bulb for a more efficient LED bulb that uses 10 watts of electricity, you’d get 100 hours of light for the same 1 kilowatt hour of energy. 10 watts x 100 hours = 1000 watt hours or 1 kWh.
The same principle applies to using gas too.
Who are Ofgem?
Ofgem is an organisation that regulates energy suppliers. It sets a maximum price that energy suppliers could charge for each unit of energy. The cap isn’t a cap on how much you spend on energy, it’s a cap on how much each unit of energy costs. The more energy you use; the more you’ll pay.
What is the Energy Bills Support Scheme?
In response to rising energy bills, the government announced the Energy Bills Support Scheme. Through this scheme, the government will give every household in Great Britain £400 off their electricity bill. It will be paid in instalments between October 2022-March 2023. You won’t have to do anything to get your discount, and you won’t have to pay it back. Find out how you’ll receive yours below:
- If you pay for your electricity by direct debit, you will see an automatic deduction off your bills between October 2022-March 2023
- If you have a prepay smart meter, your meter will automatically be topped up on a monthly basis
- If you have a traditional prepay meter, you’ll receive an energy bill discount voucher in the first week of each month, via text, email or in the post
You can find out more about the scheme and other help you might be eligible for here.
Alongside this, other help is available for those needing help with their energy bills.
You may also be interested in...
- How to use a smart meter to save money - with a smart meter and accompanying in-home display, you can be more aware of your energy usage.
- How smart meters can help reduce your carbon footprint - find out how smart meters will help us transition to a lower carbon future.
- How to get a smart meter – three steps to help support Britain’s energy upgrade.
*Nationally representative survey undertaken by 2000 adults on behalf of Smart Energy GB.