Loophole in Government’s £200 Discount for Energy Bills
In response to the ongoing energy crisis, the government has announced up to £350 per household to help customers deal with the rising costs. You’re expected to pay this back from 2024, but there is a loophole meaning not everyone has to.
At the beginning of February, the energy regulator Ofgem announced that it would be raising the energy price cap for April 2022 by an extra £693 a year for direct debit customers and by £708 for prepayment users. This is due to the rising cost of wholesale gas that has put pressure on energy companies, leading to many supplier failures in the last six months.
The government has responded by offering a Council Tax Rebate and a £200 discount on energy bills, expecting customers to pay back the £200 over five years. However, there are some loopholes meaning you might not have to pay the discount back at all.
What Is The Energy Rebate?
On the same day as the price cap announcement, the government announced that it would provide financial help to households in order to deal with the ongoing energy crisis. The government will provide households with up to £350 in help.
Council Tax Rebate
For those households that fall into Tax Bands A-D, a £150 rebate will be given by the local councils. You will not have to pay this money back and it is a measure to serve against inflation and rising household bills.
The £200 “Discount”
The most controversial part of the rebate is the so-called £200 discount on all household energy bills. The government will discount £200 off of all energy bills in October 2022 to help customers manage the higher price cap. The acceptance of the discount is not optional.
Although the £200 discount is not a loan since you will not have to pay interest on it, customers are expected to pay it back over a period of five years starting in 2024 (when gas prices are supposed to fall). This means that £40 a year will be added to your bill from 2024.
Direct debit customers and smart prepay users will have this amount automatically discounted. Prepayment customers using a traditional key-meter will receive a cheque or voucher.
What’s the Loophole?
The £200 discount will be applied in autumn, so if you pay an energy bill in October, this amount will be discounted from it. This means if you stop paying an energy bill before October, you won’t get the discount. More unfairly, if you are not paying an energy bill now but start paying one after October, you might still be expected to pay from 2024.
However, if you pay for an energy bill in October when you receive the discount, but stop paying after due to a change in your circumstances, you might not have to pay it off at all. Since the discount is applied per bill and not per person, a household who shares the same energy bill will only have to pay back £200.
This means you might end up paying nothing or less if you:
- Move back in with your parents
- Move in with housemates
- Move abroad
- Move in a care home
The government might still close the loophole, but for now this is the way you can end up paying less.