What does the Energy Price Guarantee mean for EV charging costs?

After a summer of speculation, new UK Prime Minister Liz Truss has begun her term in office by launching a package of support for households facing rising energy costs.

The Energy Price Guarantee comes into effect from 1 October 2022 and fixes the maximum cost of gas and electricity for two years. For some drivers, this also affects the cost of charging an electric vehicle at home.

Introduced in 2017, price caps limit what utility companies can charge households for their gas and electricity, while also allowing them to stay profitable. Government regulator Ofgem had published new rates twice a year to reflect wholesale energy prices, and the headline figure reflects the annual bill for a ‘typical’ household paying by direct debit.

Unfortunately, that system has struggled to keep pace with the once-in-a-generation energy crisis that’s unfolded as economies have recovered from Covid-19 slowdowns. Wholesale gas prices quadrupled last autumn as demand outpaced supply, since exacerbated by conflict in Ukraine and restricted imports from Russia. This also affects wholesale electricity prices, as almost 40% of the UK’s supply comes from gas power stations.

With prices capped for six months, utility companies had been unable to pass on their operating costs, causing 31 to either fold or leave the market since January 2022. Wholesale prices and the cost of transferring customers to new suppliers was reflected by a 54% increase in the cap in April with a further 80% rise projected for October – reaching £3,549 for the average household.

Effectively a long-term price cap, the guarantee fixes average household energy bills at £2,500 per year until 1 October 2024 and it’s being applied automatically. Actual bills will vary by usage, but the important figure for electric vehicle drivers is the price per kilowatt-hour (kWh) of electricity.

From 1 October 2022, electricity costs will be capped at 34p per kWh.

That’s 21% higher than the current 28p/kWh cap, introduced in April, but 33% lower than the 51p/kWh rate which had been due in October. Importantly, it means charge an electric car at home should be cheaper than the fuel costs for an equivalent petrol or diesel vehicle, despite pump prices falling since their July peak.

Average fuel costs for 5 September 2022: £1.69 (petrol) £1.83 (diesel)

The Energy Price Guarantee does not affect customers on fixed-rate tariffs. Some households may be able to cut costs further by opting for a contract with a cheaper overnight unit cost.

Other government support is also unaffected. All households will receive a flat-rate £400 towards their winter energy bills, delivered in monthly instalments, while the most vulnerable will get an extra £1,200 throughout the year. More information about these schemes is available here.

Charging network operators are businesses, so aren’t covered by the Energy Price Guarantee. The government has pledged “equivalent support” for businesses and public sector organisations on a six-month basis but has yet to confirm any details.