Renfrewshire Council

Staff update: Cost of living - Understanding the new Energy Price Guarantee (EPG) and what it means for you

Diane Dunn breaks down the key changes and how it will affect households.

Image of Dianne Dunn How your energy bills are calculated, and the impact of the Energy Price Guarantee (EPG) announced by UK Prime Minister, Liz Truss on Thursday 8 September, can be confusing.

Knowing how your bill is calculated is the first step to understanding the changes in energy prices and how the recent government intervention will impact you.

Diane Dunn, Social Renewal Lead Officer, who works closely with her colleagues in our Energy Management Unit and Advice Works has pulled together the key info that people have been asking for following the recent changes.


How household energy bills are calculated

When you pay for energy, you are paying for how much you use and the cost of supplying that energy to your home.

There are several different costs involved with supplying gas and electricity to your home:

1.      Your standing charge 
This is the basic amount you will pay for being connected to an energy supply even if you use no energy at all, which typically covers:

  • wholesale costs - the price your energy provider pays for their supply
  • the cost of delivering energy to your home - pipework, maintenance etc
  • administration and customer service
  • VAT and other government and environmental schemes and profit for your provider.

2.     Your usage
How much energy you use is measured in kilowatt hours (kWh) and tracked by the meters in your home. The cost of how much energy you use depends on the price your provider charges you per kWh.


Understanding the Energy Price Guarantee

The Energy Price Guarantee (EPG) is a limit on the daily standing charge and the price your provider can charge you per unit of gas or electricity. So, your exact bill amount will continue to be influenced by how much energy you use - the more you use, the more you will pay.

The EPG will be in place for two years from 1 October 2022 and replaces the previous energy price cap set by energy regulator Ofgem.

There are still details to be confirmed but we do know the average unit price for dual fuel customers paying by direct debit will be limited to 34.00p/kWh for electricity and 10.30p/kWh for gas, inclusive of VAT, from 1 October.*

Remember, you will also pay a standing charge each day to use your energy - on average this will be 50.66p per day for electricity and 28.49p per day for gas.*

*These prices do vary by region and you can check the rates together with information and advice for fixed, variable and pre-payment plans on the Money Saving Expert website.


The £2,500 per year energy cap

It's important to remember it's not your bill that is capped. It's the price per unit of energy you use (kWh) which is capped under the new EPG. It does not mean every household will pay a maximum of £2,500 for their energy each year.

The £2,500 figure is the amount calculated for a 'typical' household and is for illustration only. If you use less energy than the average household you will pay less than this amount, and if you use more energy, you will pay more.


UK Government plans to support rising energy costs

The previously announced supports for paying energy bills will remain in place this year. These are:

  • £400 off energy bills for households in the UK from this October. This automatic, non-repayable discount will be applied in six instalments between October 2022 and March 2023 to help households through winter. There is no need to apply for the scheme and you will not be asked for your bank details.
  • If you have a traditional prepayment meter, you will be provided with Energy Bill discount vouchers from the first week of each month, issued via SMS text, email or post, using your registered contact details. You will need to take action to redeem these at your usual top-up point, such as your nearest local PayPoint or Post Office branch.
  • £650 Cost of Living Payments if you receive means tested benefits, including Universal Credit and Pension Credit (half has already been paid).
  • £150 Disability Cost of Living Payment if you are in receipt of certain benefits, such as Attendance Allowance and Disability Living Allowance.
  • £300 one-off Pensioner Cost of Living Payment for pensioner households will be paid alongside the Winter Fuel Payment.


Further help and advice

Information on how to get support from our Energy Management Unit, Advice Works service and Renfrewshire's Citizens Advice Bureau is available through our 'employee wellbeing hub' and 'help with the cost of living' webpages.

You can learn more about understanding your energy bill and how kWh are calculated for electricity and gas usage in the 'Help to cope with rising energy bills' RenTalk on iLearn.** 

**This session took place in March 2022 and the prices and advice about energy tariffs has since changed, but all the info on how to understand your bill, how to reduce your usage and where to get help and support remain the same.

Published on Wednesday 21 September 2022