Government confirms details of £400 electricity discount

The government has confirmed the details of how its £400 discount will be applied to household electricity bills over the autumn and winter.

The Department for Business, Energy and Industrial Strategy (BEIS) said the £11.7 billion Energy Bills Support Scheme will be administered by suppliers, with the money being paid to consumers over a six-month period beginning in October.

Households will receive a £66 discount in October and November, rising to £67 each month from December through to March 2023. BEIS said spreading the payments out like this will allow households who become eligible during the period to benefit from the relevant part as there will be multiple qualifying dates rather than just one in October.

Direct debit customers will receive the discount automatically as either a reduction in their monthly payment or as a refund to their bank account following the collection of their monthly payment.

Standard credit customers will see the discount automatically applied as a credit to their account in the first week of each month, with the credit appearing as if the customer had made a payment.

Smart prepayment customers will see the discount credited directly to their meter in the first week of each month.

And traditional prepayment meter customers will be provided with redeemable vouchers or Special Action Messages in the first week of each month, issued via SMS text, email or post. They can then redeem these at their usual top-up point.

BEIS said traditional prepayment meter customers must make sure their supplier has up-to-date contact details for them to receive their voucher. It will work with suppliers and third parties to provide targeted communications and messaging to customers to ensure the vouchers are used.

The department said bill-payers of all kinds should contact their supplier if they have not received their first instalment by the end of October.

It said landlords who resell electricity to their tenants based on usage or charge all-inclusive rent covering energy costs must pass on the discount in full.

BEIS noted that approximately 1% of UK households are currently ineligible to receive the discount as they do not have a domestic electricity meter and a direct relationship with an electricity supplier, for example, because they live off grid. It said further funding will be available to provide equivalent support for these households, with details on how they can access this being announced this autumn.

Stephen Knight, director of Heat Trust, said this also applies to customers connected to communal electricity systems: “I am delighted that the government has listened to calls from Heat Trust and others and accepted that those who do not receive their heat and energy in traditional ways are also in desperate need of support at this time of spiralling prices.

“There was a real danger that a large number of families in the most need were going to be overlooked and locked out of this scheme. We are delighted they will be able to access the £400 support, and we look forward to hearing details on how this will be delivered to these households.

He continued: “Currently people on heat networks fall outside of Ofgem’s price cap, leaving many facing 300-400% increases in their heating bills as gas prices continue to rise. It is vital we ensure that families get the help they need, and we will be working closely with government and the industry to ensure this happens.”

BEIS acknowledged that people paying multiple electricity bills, for example because they own a second home, will receive more than one discount. However, the department said measures to prevent this from happening could delay the start of the scheme to the detriment of vulnerable people. It said removing the discount from those with multiple meters could also stop people who are paying on behalf of elderly and disabled individuals from receiving the payments.

The discount on electricity bills was first announced in February by the chancellor of the exchequer at the time, Rishi Sunak, as a £200 rebate in October that would be repaid in £40 instalments over the following five years. In May, Sunak altered it to a £400 non-repayable discount as part of an updated support package for households, which also includes one-off payments of £650 to 8 million low-income households on certain means-tested benefits, £300 to eight million pensioners and £150 to people on certain disability benefits.

However, since then wholesale energy prices have continued to rise, with the latest forecast from the consultancy BFY on Wednesday (27 May) suggesting the price cap on default tariffs will rise to £3,420 in October and then £3,850 in January.

In the report on its inquiry into the energy retail market released on Tuesday, the BEIS Committee said the government must provide a further update to its support package, which will be “eclipsed by the scale and longevity of the price increases now expected.”