Energy Bills Support Scheme: Government policy and FAQs

The price of energy has increased significantly in the UK and globally since summer 2021. There is widespread concern about the how this will affect domestic and commercial energy consumers.

This briefing summarises the Government support package that was first announced following the announcement of a 54% rise in the cap on gas and electricity in February, and which has since been updated (in May and July), as well as the reaction to the package. It also answers frequently asked questions about support with energy bills.

Household energy prices

Wholesale energy prices increased rapidly in the second half of 2021. Many consumers were protected, at least initially, by the energy price cap. However, the price cap increased by 54% in April 2022. There were further large jumps in wholesale prices after Russia invaded Ukraine.

Many observers predict that the energy price cap (also known as the Default Tariff Cap) will increase substantially in October 2022. In May the chief executive of Ofgem said it could rise by 40% to around £2,800 in October. Since then forecasts have increased and the latest from Cornwall Insight is around £3,580 or 80% above the current cap, with further rises forecast in 2023.

Ofgem is currently expected to announce the next price cap level on 26 August 2022.

The Energy Bills Rebate

The Chancellor of the Exchequer first announced an Energy Bills Rebate support package to help households with rising energy bills on 3 February 2022, in response to the increase to the Default Tariff Cap.

The original Energy Bills Rebate comprised an Energy Bills Discount and a Council Tax Rebate. The Chancellor announced an expansion of the Warm Homes Discount Scheme at the same time.

He said the Energy Bills Discount would be given to all domestic electricity customers in Great Britain as “an up-front discount on their bills worth £200” in autumn 2022. (Energy policy is almost entirely devolved in Northern Ireland). At the time, the Government proposed customers would pay the money back through bills in later years.

A Government factsheet provided more information on the council tax rebate. The main points included:

• A £150 non-repayable council tax rebate for all households that are liable for council tax in bands A to D in England. This is expected to benefit 80% of homes in England. It was paid directly by local authorities from April 2022.
• Local authorities will be given £144 million of discretionary funding to support people needing help with energy bills who are not eligible for the council tax rebate.
• The devolved administration will receive around £715 million to provide comparable support to the council tax rebate, where the UK Government support didn’t cover Scotland, Wales or Northern Ireland.

Rebate becomes the Energy Bills Support Scheme (EBSS)

On 1 April 2022, the Government published an explainer of the Energy Bills Discount, renaming it the Energy Bills Support Scheme (EBSS). 

The Chancellor announced a further Cost of Living support package on 26 May 2022 to help households cope with high inflation. As part of this, he said the EBSS would be doubled to £400 and would now be provided as a non-repayable grant.

An HM Treasury factsheet on the cost of living support package and a Department for Business Energy and Industrial Strategy (BEIS) Energy Bills Support Scheme explainer set out the details of the EBSS as amended. Key points include:

• All households with a domestic electricity connection (and/or a domestic electricity meter) will receive a £400 non-repayable grant as a credit from their energy supplier in Autumn 2022. These households will be automatically eligible for the grant and do not need to apply for it.
• The grant will be paid to households over six months from October 2022. Direct debit and credit customers will receive it as credit to their account. Customers on prepayment meters will have the money applied to their meter or paid via a voucher.
• The grant will apply directly to households in Great Britain. The Government will fund the Northern Ireland Executive “to provide comparable support with around £150 million through the Barnett formula in financial year 2022 to 2023”.
• The grant is additional to the £150 council tax rebate announced on 3 February.
• The Government held a consultation on proposals for the EBSS from 11 April to 23 May 2022. The Government response was published on 29 July 2022.

EBSS consultation and policy design

The Government held a consultation on technical proposals for the EBSS from 11 April to 23 May 2022. It published its consultation response on 29 July 2022, setting out its final policy decisions for delivery of the EBSS.

A press release and an update to the EBSS explainer summarised the new announcements, including:

• The £400 discount will be administered by energy suppliers and paid to consumers monthly, in six instalments, from October 2022.
• The payment of the discount in instalments (rather than all at once) will ensure that people whose housing circumstances change in the six month period (for example those leaving or moving home) can still benefit from the relevant portion of the total £400 discount.
• Suppliers will be required to provide each eligible domestic electricity customer they serve on the Qualifying Date (first day of eachEBSS delivery month) with either £66 or £67 a month during each month that they are eligible for.

The documents also set out how customers will receive their discount:

• Customers with a domestic electricity meter point who pay for their energy via standard credit, payment card and direct debit will receive automatic deductions or credits to their bills each month over the six month period.
• Smart prepayment meter customers will see the discount credited directly to their smart prepayment meters each month.
• Traditional prepayment meter customers will be provided with discount vouchers each month, issued via SMS text, email or post, using the customer’s registered contact details. These customers will need to take action to redeem these at their usual top-up point, such as their nearest local PayPoint or Post Office branch.

The consultation response reconfirmed that the Energy Bills Support Scheme will apply to consumers in England, Scotland and Wales. It said the Government is “working urgently to ensure that the people of Northern Ireland receive the equivalent support as soon as possible”.

The response also provided detailed information on the scheme’s eligibility, grant design, compliance, enforcement and sanctions, and managing the costs of implementing the scheme.

Alongside the response, the BEIS published a draft Secretary of State Direction to suppliers. A final version will be issued ahead of the scheme’s launch.

Further reading

The Library briefings Domestic energy prices and Energy bills and tariff caps (August 2021) provide more information on the background to rising energy prices and the energy price cap.

The Library briefing Increasing cost of living has links to the Library’s wider publications on the rising cost of living in the UK, including cause of inflation, the effect on households, and Government support.