Policy paper

How households and businesses will be supported by the Energy Prices Bill

Updated 21 October 2022

This was published under the 2022 Truss Conservative government

The Energy Prices Bill was introduced to Parliament on 12 October 2022. The Bill delivers on the commitments made by the Prime Minister and Chancellor and will support households and businesses by providing the legislative framework to deliver the government’s Energy Price Guarantee and Energy Bill Relief Scheme. These schemes will apply to all domestic and non-domestic consumers on the grid and will ensure that support covers the increase in costs from October.

The Bill will also support domestic and non-domestic consumers who are not captured by either scheme, including those using alternative fuels such as heating oil, living in park homes, or those on heat networks.

These schemes build on the £37 billion package of support to help households with cost of living, targeting the most vulnerable households. This includes a £11.7 billion Energy Bills Support Scheme, worth up to £400 each for around 28 million households, as well as a £150 disability cost of living payment and a £650 cost of living payment for households on means tested benefits.

This unprecedented intervention will help households and businesses manage the rising cost of energy, reduce inflation and support economic growth.

Energy Price Guarantee in Great Britain

The Energy Price Guarantee will ensure that a typical household in Great Britain will save around £700 this Winter, based on what energy prices would have been under the current price cap - reducing bills by roughly a third. The scheme will be in place from 1 October 2022 until 31 March 2023. A review will be launched to consider more targeted measures to support households with their energy bills after this period.

The scheme is being stood up in Great Britain using private law contracts with energy suppliers. Powers in the Bill will establish a more robust spending provision, and ensure all suppliers enter and remain in the scheme. In doing so, the Bill provides for Ofgem to monitor and enforce the Energy Price Guarantee. See further detail on the design of the Energy Price Guarantee.

Energy Price Guarantee in Northern Ireland

The Energy Price Guarantee in Northern Ireland will deliver equivalent benefits to households in Northern Ireland to the GB EPG. Since there are a different set of energy suppliers in Northern Ireland, the contracts for the EPG scheme in NI will be separate from the GB contracts. The Bill will reflect this and will also reflect the role of the Northern Ireland Utility Regulator in enforcing the scheme. In Northern Ireland, benefits from the EPG will be passed through from 1 November 2022, with the level of benefit being set to cover the increased energy costs between 1 October-1 November 2022 too.

Energy Bill Relief Scheme in Great Britain

The Energy Bill Relief Scheme will enable the government to provide financial assistance on energy bills for all eligible non-domestic customers, including businesses, charities and public sector organisations. The Bill will provide the framework for the scheme, with the detail necessary for implementation set out in regulations and associated guidance documents. See further detail on the design on the Energy Bill Relief Scheme.

Energy Bill Relief Scheme in Northern Ireland

These powers will establish an equivalent scheme to the Energy Bill Relief Scheme in GB, with support rates and scheme design adjusted to reflect the different wholesale prices and market conditions that impact on the supply market and energy bills in Northern Ireland. As with the Energy Bill Relief Scheme in GB, the primary legislation will provide the required framework for the scheme, and will set out the necessary implementation details within the regulations and associated guidance documents. The delivery approach will diverge slightly from the GB scheme and will require suppliers in Northern Ireland to abide by such regulations enforced by the NI Utilities Regulator. The Bill will also reflect this and the role of the Northern Ireland Utility Regulator in enforcing the scheme.

Energy Bill Support Scheme Alternative Funding

This scheme is intended to provide the £400 of support for households across the UK that would otherwise miss out on the Energy Bills Support Scheme – which the vast majority of households are already receiving – as they do not have a domestic electricity contract. It will also support the delivery of £100 Domestic Alternative Fuel Payments where these cannot be automatically delivered to households through other means, such as suppliers. The Alternative Funding will provide the full support this winter, with an announcement on this in due course. The Bill will provide powers to deliver the funding through designated bodies.

Northern Ireland Energy Bills Support Scheme (NI EBSS)

Powers in the Bill will provide a robust basis to allow the government to make payments and deliver NI EBSS, which will provide £400 of support to households in Northern Ireland this winter. Powers will enable a similar delivery model to the Energy Bills Support Scheme in Great Britain, in respect of using the existing regulatory regime to enforce and provide assurance to the government on delivery.

Alternative Fuel Payments (domestic)

This scheme is intended to deliver a one-off payment of £100 to UK households who are not on the mains gas grid and therefore use alternative fuels, such as heating oil, to heat their homes. Powers will enable the government to deliver support via electricity bills in both GB and NI, under a similar delivery model to the Energy Bills Support Scheme. The payment will ensure that a typical customer using heating oil does not face a higher rate of growth in their heating costs since last winter, in comparison to those using mains gas who are supported by the Energy Price Guarantee. The government will set out the timing of this payment soon.

Alternative Fuel Payments (non-domestic)

Powers in the Bill will allow government to provide support for non-domestic consumers who are not able to receive support for their heating costs through the Energy Bill Relief Scheme, as they use heating oil or alternative fuels instead of gas. Support will likely take the form of a flat rate payment. Powers will enable the government to deliver support via electricity bills in both GB and NI, under a similar delivery model to the Energy Bills Support Scheme, or to provide support through designated bodies, such as local authorities or other statutory bodies.

Pass-through Requirement on Intermediaries

This legislation is intended to ensure support from the Energy Price Guarantee, Energy Bill Support Scheme, or Energy Bill Relief Scheme, is received by the end user in cases where intermediaries procure energy on their behalf in accordance with the terms of regulation. For example, the legislation will require landlords to pass benefits through to tenants.

Heat Networks

Powers in the Bill will ensure that heat networks benefiting from the Energy Bill Relief Scheme pass through cost savings to their consumers. The Bill provides for the appointment of an Alternative Dispute Resolution body which will handle complaints raised by consumers against their heat network if it has not complied with passthrough requirements. Heat suppliers will be required to provide the addresses of the buildings supplied by their heat networks to the Secretary of State to ensure that government can direct support to heat network consumers.

Cost-Plus Revenue Limit

The government is taking steps to enable low carbon electricity generators to move onto fixed prices. This will sever the link between abnormally high gas prices and the price of electricity from such generators, ensure consumers pay a fair amount for their electricity, and ensure electricity generators are not unduly profiting from the energy crisis caused in part by Russia’s invasion of Ukraine. The Bill provides powers to set a temporary fixed price for low carbon generators not already on a Contracts for Difference (CfD), limiting the revenue they are able to achieve in the wholesale market. The temporary fixed price is intended to be a short-term intervention, aiming to reduce the immediate impact of abnormally high wholesale prices on consumers. Secondary legislation will set out which categories of generators will be in scope and an appropriate level of revenue those generators can achieve in the market.

We are also legislating for powers that would allow us to consider running a voluntary CfD process for existing generators to take place in 2023. A voluntary contract would grant generators longer-term revenue certainty and safeguard consumers from further price rises. These new primary powers will allow for secondary legislation to be made to ensure that the legislative regime for CfDs can be utilised to allow existing low carbon generators to enter these voluntary CfD contracts, and will largely reflect how contracts and payments are managed under the current Contracts for Difference Scheme.

Both options would impact the remuneration that the generator currently receives from the wholesale electricity market spot price, with the aim of protecting consumers from paying excessively high prices for low-carbon generation. Generators would also continue to receive their existing revenue support or subsidy payments, for example Renewable Obligation Certificates, which will help preserve market stability.