News: Major energy bill changes
Martin's 10 NEED-to-knows

A must-read to clear up mass confusion about the dire 54% price cap hike, new £200 loan-not-loan, whether you should now fix, the £150 council tax rebate and more...

After an awful six months, with millions seeing their energy firms go bust, now the nation faces a once-unthinkable, but still catastrophic and disastrous, 54% rise in bills in April.

On Thursday, the Chancellor made a spate of announcements, which I then interviewed him about as the centrepiece of my show - watch my ITV energy interview with Rishi Sunak, including some of what I discuss below plus issues such as why he won't levy a windfall tax on big energy firms.

As so many of you have questions, I'm doing a live TikTok energy Q&A today (Wed) at 6.30pm, but do read my need-to-knows below first. However, I should say we only know the skeletons of the Chancellor's new schemes - the detailed consultation documents aren't out yet.

1. New. On 1 April the energy price cap rises 54% - you'll pay half again on top of what you pay now (up an average £700/yr)

The vast majority of homes in Eng, Scot and Wales (NI doesn't have a cap) are now on price-capped, default standard variable tariffs - pretty much anyone who isn't still on a fixed deal.

As we've long predicted, on Thursday, we got the hideous news it'd rise an unaffordable-for-many, poverty-inducing 54%, for six months from 1 April. The rise is down to the fact the algorithm is partly based on wholesale energy prices and they exploded during the August to January assessment period. Yet, remember, the price cap is misnamed...

There's NO MAX you can pay on energy. Use more, pay more. What's actually capped are electricity & gas standing charges and kWh rates - the link shows the current and new rates.

To show the scale of magnitude, someone with average direct debit use currently pays £1,277/yr (£1,309/yr prepay). From 1 April, they'll pay £1,971/yr (£2,017/yr prepay) - a £693/yr rise (£708/yr). See more on how the price cap works.

2. If things stay as they are, the October price cap will rise another 20% on top

As most energy decisions are made for at least a year, it's worth knowing what rate the crystal ball currently shows for the 1 October price cap - based on wholesale energy costs over February to July.

If wholesale rates stay roughly where they are right now, we would see a rise again in October of 20% on top of April, taking the rate for someone with average use to £2,365/yr. Though it should be noted, regulator Ofgem is consulting on changing the cap more frequently so the October rate may not last the full six months.

The markets do seem to suggest the price cap will drop in April 2023, and indeed the Chancellor told me that he'd been looking at that data when deciding policy (which I suspect is what the new 'loan-not-loan' in point 4 below is about).

And of course, while a war in Europe is worrying for a whole lot more than just energy prices, if the Russia-Ukraine conflict escalates substantially, that's likely to see wholesale prices ramp up further.

3. There are NO tariffs meaningfully cheaper than the price cap

Before the energy world changed last October, I always said the price cap rate was pants, so switch to something cheaper. Today there are no tariffs meaningfully cheaper than the price cap and the cheapest open-market fixes are all more expensive than the 1 April price cap.

When the rate rises in April, as it's a cap, firms can choose to charge less, but most main suppliers have always priced their standard tariffs within a couple of quid of it. I don't see that changing unless wholesale rates rapidly drop.

4. New. In Oct a loan-not-loan will reduce bills by £200, then raise them by £40/yr for 5yrs from April 2023 (not N. Ireland)

The Chancellor announced three new measures on Thursday. What's looking to be the most controversial is what he called a £200 "energy bills rebate" for ALL households in Eng, Scot and Wales.

There's been much confusion about this, so please watch my 2-min new 'energy loan' video explainer - that's the easiest way to understand it...

In brief though there are two elements here...

• In around October 2022: EVERY ELECTRICITY BILL will be reduced by a flat £200 (though a consultation may mean it's paid across a few months, not in one go). There is no choice - YOU CAN'T OPT OUT. Prepay users will get the money via their smart meter, voucher, cheque or similar.
  
  For those with small bills, the flat £200 will have a big impact; for those with big bills, a little one.
  
  
• From April 2023: EVERY ELECTRICITY BILL will have a £40/yr levy added to it, and that will happen for five years to effectively repay the initial discount. And in a reverse to October, for those with small bills, the flat £40 will have a bigger impact than for those with big bills.

While many are calling this a loan, it isn't. It's automatic, not optional. It isn't linked to individuals or households or buildings, it's about bills. You have to take it if you pay for electricity this year. You have to pay extra for it if you pay for electricity in future. It's not regulated via the Financial Conduct Authority. It doesn't go on your credit file.

It's an energy levy (like the green infrastructure levy added to bills). First there's a negative levy reducing bills, then a levy added to them. While for people whose home-situation doesn't change it will feel like a £200 loan repaid at £40/yr, for others there are bizarre outcomes, eg...

- LOSERS: Five people share a house in Oct then separate. They get 1 x £200 discount off their bill. They then all move out and live alone. From the following April all five of them will have bills £40/yr higher. Similar for those moving out of parents' houses in the five years.

- WINNERS: Two singles live alone in Oct, then meet. They each get a £200/yr discount, then they move in together, so they've only one bill, and it'll just have one £40/yr added. 

Ultimately, I believe the Chancellor is taking a big gamble that energy bills will drop rapidly by April 2023. If they don't, this is a lose-lose of high bills with an added levy on top - political dynamite.

I'm already hearing protests. A staggering 80% of 44,000 votes in my Opt out? Twitter poll said they'd opt out if they could (though that poll's NOT statistically representative so more research is needed). I think we may see changes in the consultation.

5. New. Households in England in council tax bands A to D get £150 rebate in April towards energy increases  

The other rabbit the Chancellor pulled out of his hat last week was a £150 council tax rebate for homes in England in bands A to D (about 80% of homes), to be paid in April. We still await detailed rules, but there's full info in our £150 council tax discount explainer.

He chose council tax because energy bills are household bills, so council tax is a decent proxy, and bands A to D reach many lower and middle-income homes. Indeed the independent Resolution Foundation said it's on the progressive side, though isn't without challenges.

The Chancellor admitted to me, it's not a perfect system, as some get it who don't need it - after all, council tax is based on 1991 valuations so there are now some very expensive band D properties in London, and some people with low incomes in band E homes. (Related: See my council tax - challenge your band system.)

He didn't mention though that councils are allowed to increase the tax by up to 3% in April, which would add £57/yr to a typical band D property's bill, eating away some of this.

Scot, Wales & NI: Devolved governments will receive a total of £565 million in funding to be able to put their own schemes in place. We don't yet know what they'll do with it though. 

6. New. Not due the council tax discount but struggling? You may be able to get 'discretionary help'

Many homes are exempt from council tax, as are all-student households and student nurses, and some of those households won't get the £150. So there will be a £144 million discretionary fund distributed via local authorities in England that should cover some of those cases and those who slip through the net, but we don't have eligibility criteria yet.

PS: The Chancellor called me two days before the announcement to get my thoughts. He wouldn't tell me what his plans were but did say: "Sadly no system is perfect". So, mindful of those excluded from Covid support, I said: "Then why not set up a discretionary fund for the edge cases?" He perked up and said: "That's a great idea".

7. Is it time to ditch the price cap and get a fix? (Spoiler alert: for most, no)

For months, for most the right thing to do has been 'nothing' as then you either stay on the price cap or move to it when your cheap fix ends (or your energy firm goes bust). Of course, now we know the new price cap, my mailbag is swamped with people asking what to do now.

Again, it's one of those to talk you through, so do watch my Stick on price cap or get a fix? 4-min video (courtesy of ITV), from Thursday (those on older cheap fixes, you're likely best to stick with them, then watch this video for what to do when they end).

A transcript is also available via the link. To check what tariffs are available, use our Cheap Energy Club and also ask your existing provider what it'll offer. Do remember to compare the actual rates, not the direct debit it's offering to set (which depends on usage estimates).

8. Warm home discount to rise £10, to £150 (woop-de-woop) though wider eligibility criteria will be expanded 

The warm home discount is paid to many on low incomes, including pensioners. The Government says it will continue with plans to increase it by £10 (not exactly huge since it's been the same for eight years, while energy prices have more than doubled in the last year alone).

It also plans to extend the eligibility criteria so an additional 780,000 households will qualify, but we don't yet know who. Likely it'll be more people on means-tested benefits. 

For this winter's scheme, only E.on, E.on Next, Bulb and So Energy still have applications open, so go quick if you may be eligible - see warm home discount help.

9. Energy price hikes will be hell for many. If you're already struggling to pay, some help may be available... 

Even with the Government announcements, as I told the Chancellor directly, I still believe some will be left with the choice of freeze or starve. Citizens Advice reports record numbers asking for energy help, and that's before April's huge hikes.

We've a new What to do if you're struggling to pay your energy bills guide to cover everything you can do, and crucially where to get help.

10. The other way to cut bills, is, obviously, to use less...

Our energy saving tips help with the simpler stuff, such as turning your thermostat down and cutting shower time.

But other ways to use less aren't as clear-cut, such as whether to leave the heating on low all day - we've the pros and cons of this and more in our Energy mythbusting guide. And the team will be working on adding more tips soon.