Energy bill freeze confirmed: what will you pay now and how will it work?

An energy bill freeze has been announced by the new Prime Minister, but what does it mean for you and your bills?

Mother adjusting temperature of radiator while baby sleeps in carrycot on the floor
(Image credit: Getty Images)

New Prime Minister Liz Truss has announced an energy bill freeze to help families cope with spiralling energy costs. 

Energy regulator Ofgem had been due to increase the energy price cap (opens in new tab) by a staggering 80% from 1 October - raising average annual energy bills for around 24 million households from the current cap level of £1,971 to £3,549. And predictions suggest that the cap was due to rise even further in 2023. This left millions of families increasingly worried about how much their energy bills will cost (opens in new tab) and how they will afford them. 

The government had previously announced a £400 energy rebate (opens in new tab) to help cushion the blow of rising prices, but there has been widespread criticism that it was insufficient. 

In her first speech as Prime Minister, Liz Truss (opens in new tab) vowed to immediately address rising energy bills and to tackle supply issues that are driving prices so high. Speaking on the steps of Downing Street on 6 September, Liz Truss said: “We will get spades in the ground to make sure people are not facing unaffordable energy bills… I will deal hands-on with the energy crisis caused by Putin’s war.

“I will take action this week to deal with energy bills and to secure our future energy supply.”

 What does the energy bill freeze mean for your bills? 

Energy bills will be frozen at £2,500 for a typical home for two years, effective from 1 October 2022. This means that the previously announced October price cap rise will effectively be cancelled out. This new cap is slightly higher than the current level, but with the £400 energy rebate still due to be paid from October, it actually works out to be near enough the same as the current cap of £1,971. 

Right now, the unit prices are capped at 7p for gas and 28p for electricity and have been this level since April 2022. They were going to rise to 15p for gas and 52p for electricity from 1 October. But this now won’t happen.

Bear in mind that the £2,500 figure refers to average bills based on typical use. If you use more energy, you may end up paying more, if you use less, your bill could be paying less than £2,500.

You will also likely pay more if you have a prepayment meter or if you pay by cash or cheque as opposed to direct debit.

The energy bill freeze will apply to all households in England, Scotland and Wales who pay for their energy. For those in Northern Ireland, a similar scheme is being worked on. 

Personal finance analyst Alice Haine (opens in new tab) from Bestinvest, commented: “Britons will be breathing a collective sigh of relief following Liz Truss’s decision to freeze annual energy bills at £2,500 for the typical household this winter and next. Households were bracing their finances for an 80% hike in their energy bills from October 1 with the more vulnerable resigning themselves to a long winter with little or no heating because they simply could not afford such an astronomical rise."

Unit price for gas/kWhUnit price for electricity/kWh
Current price cap7p28p
Previously announced Ofgem cap for October 202215p52p
New average unit rate from 1 October10.3p34p

 How will the energy bill freeze work? 

The government will effectively set a new energy price cap that takes the place of the cap set by Ofgem. This will come into force on 1 October 2022 and be in place for two years. This will be achieved through a new Energy Price Guarantee which limits the price suppliers can charge customers for units of gas. 

You won't need to apply for the scheme and it will be applied when your bill is calculated. 

But with wholesale energy prices still going up, the government is expected to borrow a large sum in order to compensate energy companies for the difference between how much they pay for the gas and how much they are allowed to charge their customers. It has not yet been confirmed how the bill freeze will be paid for, but a plan is expected to be laid out by new Chancellor Kwasi Kwarteng later this month.

What to do if you are on a fixed rate tariff

Those who have fixed at a higher rate will see their unit prices reduced by 17p per kWh for electricity and by 4.2p per kWh for gas. According to the government, your energy supplier will adjust your fixed tariff automatically and that fixed-rate customers do not need to do anything to benefit from the Energy Price Guarantee scheme. 

Energy supplier E.On has said (opens in new tab) that the scheme will protect those on fixed rates in the same way it protects those on standard variable tariffs. E.On has said it will be in touch with fixed-rate customers in the near future to provide further details. 

Next steps

  •  If you have fixed your tariff in the last 14 days, you could still be in the cooling off period and could still cancel without facing a penalty.  
  •  If you fixed a while ago at a higher rate than the new cap and are outside of the cooling off period, a reduction will be applied automatically and you don't need to do anything
  • More details are emerging, so we will keep this page updated with the latest information. 

 What happens if I still can’t afford my energy bills? 

Despite the freeze, many families will still struggle to afford their energy bills (opens in new tab). If you’re struggling, know you’re not alone and help is available.  

  • Speak to your current supplier about alternative payment options or whether you can be moved to a cheaper tariff.  
  • Ask to be put on the Priority Services Register.  
  • Check to see if you are eligible for free gas and electricity vouchers. 
  • See if you qualify for any help from the Government. 

Campaign group The End Fuel Poverty Coalition (opens in new tab) has argued that despite the energy bill freeze, many families will still be in fuel poverty and that more must be done to help those most vulnerable to rising prices.  

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Similarly, Imran Hussain (opens in new tab), director of policy and campaigns at children's charity Action for Children, said: "This is a big intervention with a big hole in it. Fixing the cap is welcome and much needed, but the sums still won’t add up for low-income families who despite this help will continue to face bills far beyond what they can afford. This crisis isn’t just about energy; food, fuel and housing costs have also rocketed, forcing many families to ration even the basics.

"This package should’ve thrown more of a lifeline to the families who need it most. We desperately need more targeted help through benefits for the low paid and those who have lost their jobs or cannot work because of disability, illness or caring responsibilities. Even with a freeze, energy bills will still be double what they were a year ago, the price of other essentials continues to soar, and the true value of benefits has been cut. Low-income families needed help with energy bills but also financial hope for the future if their children are to avoid a bleak Christmas and New Year."

It is hoped that further help with energy bills could be made available in the upcoming mini budget (opens in new tab).