British households could receive billions of pounds in energy rebates to reduce the impact of soaring bills, under plans expected to be announced in the next few days.
The government is expected to confirm that it will underwrite around £6 billion of state-backed loans to energy suppliers to limit the impact of spiralling energy prices on household bills, amid pressure on the Prime Minister to address the cost of living crisis.
The so-called “rebate and clawback” scheme will provide a £200 rebate for every household, with energy suppliers passing on the money from government loans, following the plan’s reported approval by Mr Johnson and Chancellor Rishi Sunak.
The rebate is aimed at reducing the financial pressure on households when the energy price cap rises in April. However, the loans will be paid back by consumers over the coming years when energy prices fall, and the cost of living crisis has eased.
The energy price cap – which limits how much suppliers can charge consumers for their energy usage – is expected to soar by around 51% in April. The cap is set by regulator Ofgem which reviews and updates it every six months to reflect factors such as increases in wholesale energy prices, which have been spiralling over recent months.
The current cap, which runs until the end of March 2022, is £1,277 a year, but market intelligence agency Cornwall Insight predicts that it could rocket by more than £640 to £1,925 a year for households with typical usage. Find out more in our article What is the energy price cap?
The government is also considering other ways to reduce the financial strain of rising bills for households, such as extending the Warm Home Discount scheme, and council tax rebates and increasing state benefits are also being looked at.