Within days, energy companies will begin reaching out to household customers with details of new energy tariffs – including information for fixed-contract customers.
The government has said many people on permanent contracts will receive a rebate equal to the support given to those with the price cap.
It does mean, however, that some who have opted for a pricey fix – in anticipation of soaring energy prices – are still paying more than others.
New bills come into force on October 1st.
The government’s energy price guarantee, unveiled on Thursday, means price increases will be capped on variable domestic energy tariffs for 24 million homes in England, Wales and Scotland.
Normally their bills would be governed by regulator Ofgem’s price cap – but the Government’s new two-year plan replaces those agreements.
This means the average unit price for dual-fuel customers paying by direct debit will be capped at 34p per kilowatt-hour (kWh) for electricity and 10.3p per kWh for gas.
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For a typical household – one using 12,000 kWh (kilowatt hours) of gas per year and 2,900 kWh of electricity per year – this means that the annual bill will not rise above £2,500 from October. Without this intervention, that annual bill would have been £3,549 per year.
But charities warn many will still struggle because the typical household paid £1,277 a year last winter.
The total bill will continue to vary depending on a household’s actual gas and electricity consumption and their payment method.
Some other households get the equivalent discount – but that doesn’t mean their tariff is exactly the same as limited variable offers.
For example, a mechanism has yet to be developed to implement the government’s intention for households in Northern Ireland to receive the same support.
Even before the announcement, domestic customers may have decided to anticipate future price increases by choosing a fixed tariff.
If this was more expensive than the new maximum rate then the government has stated that those customers will receive the appropriate discount.
More specifically, this means an automatic reduction in unit prices of 17p per kWh for electricity and 4.2p per kWh for gas – equivalent to around £1,000 for a household consuming a typical amount of gas and electricity.
This could mean that a household that has chosen an expensive fixed tariff pays more than a household with a capped variable tariff, even after the rebate.
You do not have an automatic right to cancel this firm deal without penalty unless you have opted in within the last 14 days.
The Department for Business, Energy and Industrial Strategy said the switch was “ultimately a decision for individuals”.
Providers will begin contacting customers in the coming days to explain what the changes mean for their specific tariffs and direct debit or prepayment fees.
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