A fresh approach What Liz Truss’s pledge to tackle the energy crisis could mean for householders

Q What is the price cap?

A The energy price cap is set by the regulator, Ofgem, and dictates the amount energy suppliers can charge customers on their standard variable tariffs. The cap is quoted in the form of the average annual household bill. Currently, it is £1,971, and was set to rise to £3,549 in October.

Instead, Ms Truss wants to effectively freeze the cap at £2,500 – saving households more than £1,000.

Q Does this mean I will not pay more than £2,500 for my power?

A As the price cap is a limit on the average bill, customers can pay far more, or much less, depending on their usage. This is because the cap restricts the rates suppliers can charge customers for energy usage. The cap includes standing charges, which are billed to consumers at a daily rate regardless of their energy use, and unit rates, which are charged to households for every unit of gas and electricity they consume.

Q Will I still get the £400 rebate?

A Every household in the UK will still receive the £400 payment from the Government as part of the cost of living support package, which Rishi Sunak devised while he was still chancellor. This money is a one-off payment that will be deducted from households’ energy bills automatically and is non-repayable.

The £2,500 figure cited by the Truss team takes this rebate into account, hence why it is higher than the current price cap of £1,971.

Q I’ve recently locked into a fixed deal – will I miss out?

A In response to earlier projections that the price cap could rise to as high as £6,616 next year, some households signed up for fixed rate deals to protect themselves from further price rises.

Should the price cap be frozen at £2,500, however, customers on fixed-rate deals will likely be paying a far higher rate for their energy use than they would on a standard variable tariff.

Customers can leave a fixed-rate deal before the term is up, but some come with exit fees of up to £300.

Q Will this mean I have to pay higher bills further down the line?

A Under proposals made by certain energy providers, households would have paid inflated energy bills over the next decade, as a means of spreading the cost of freezing the cap at its current levels. However, Ms Truss’s team has said the bailout will be funded through government borrowing.

The details of how taxes would fund the policy have not yet been revealed, however, a think tank has said it would likely be through a combination of further windfall taxes on oil and gas giants, wealth taxes and corporation taxes.

Q Does this mean my direct debit will fall?

A Most households pay for their energy via direct debit. The payments are set by suppliers and based on your estimated energy use over the course of a year.

If the price cap freeze means your direct debit payments are too high, you will build up credit with your provider that you can use at a later date.

Q I am on a pre-payment meter – does this apply to me?

A The rates at which prepayment meter customers are charged are fundamentally the same as for those paying via direct debit.