Government introduces £2,500 a year price cap

In a statement by Prime Minister Liz Truss in parliament today (8 September), from 1 October, the energy price cap will increase to £2,500 a year - although this is more than £1,000 lower than the initial increase of £3,549 announced by Ofgem late last month (26 August). This £2,500 figure will be in place for the next two years. 

In a statement published by business secretary Jacob Rees-Mogg, the cost projections for the delivery of the energy price guarantee are uncertain as they “depend upon usage levels” and, for future three-month periods, the wholesale price of energy. 

This comes in addition to the £400 energy bill support scheme. This will see households’ energy bills discounted by £66 in October and November, rising to £67 for each month from December through to March 2023. 

Businesses, charities and public sector organisations will see their energy costs capped at the same price per unit that households will pay under the government’s new plans but will only be in place over the course of six months. This will be reviewed after three months and may be extended for certain industries and vulnerable businesses. 

This support will not be funded through a windfall tax. 

Truss also announced that she is lifting a ban on fracking and will take action to boost domestic energy production. Additionally, the government will suspend green levies. 

Alongside this, the government will be setting up a new taskforce to negotiate long-term contracts with suppliers, reducing the price they charge, and will launch a new licencing round for North Sea extraction. 

Looking into the future, in order to “improve long-term energy security”, Truss announced two reviews - one exploring energy regulation and the other at how the government can reach net zero “in a way that is pro-business and pro-growth”. Former energy minister Chris Skidmore will lead this review. 

The cost of her energy plan will, however, not be announced until a treasury statement made by new chancellor Kwasi Kwarteng is outlined later this month.