UK households ‘to be given £200 rebates’ to cover soaring energy bills under Treasury plans

UK households are to be offered discounts of around £200 to help with soaring energy bills but suppliers said the scheme would only cover around a third of the expected jump in gas and electricity costs this year.

Bills are expected to rocket from £1,277 to around £2,000 for the average home to reflect a huge jump in wholesale gas prices and the cost of dozens of suppliers that have gone bust in recent months.

Regulator Ofgem will unveil its new energy price cap at 11am on Thursday after bringing forward the announcement. The new cap will come into force from 1 April.

To help struggling families deal with the blow, a £5bn to £6bn government-backed loan scheme is to be launched, allowing suppliers to borrow money to cover upfront energy costs.

The plan will allow providers to claw back money over several years rather than hitting bill payers with all of the increase at once.

One senior industry source told The Independent that negotiations had been underway with a major high street lender to cover additional costs relating to supplier failures.

The talks broke down because the bank involved wanted a rate of interest that the government and suppliers deemed to be excessive.

Other industry sources said that suppliers believed they had not been properly briefed on the government’s plans, felt locked out of recent consultations by the Treasury and had been surprised to read newspaper reports about the loan scheme on Wednesday.

The measures, which have reportedly been agreed by ministers, fall well short of the £20bn of loans that the industry had called for and will only cover around a third of the bill increases that customers face.

Under the plans, first reported in TheTimes, suppliers will give households a rebate equivalent to £200 each. It is not clear how this money will be distributed among different households.

Ministers are reportedly also expected to announce extra help for people in greatest need, including an extension of the warm home discount that offers £140 a year off bills for people on low incomes.

The Treasury dismissed the reports as “speculation” and declined to comment further.

Energy suppliers welcomed the news but pointed out that the level of financial support was less than had been hoped for.

A spokesperson for Octopus Energy said spreading the increased costs over several years and supporting every household would be a “great move”.

“We were hoping for more money to be taken off bills but we haven’t yet been given details of how it will be implemented. It all depends on implementation.”

Suppliers will expect to eventually recover the money they borrow from their customers and bills will need to rise further if wholesale prices do not begin to decrease.

Analysts forecast that high energy prices will last for at least two years.

If prices fall, the scheme would likely mean these drops in wholesale costs will not be passed on to customers until the government-backed loans have been repaid.

Energy price rises are expected to come alongside an overall spike in the cost of living across the UK, with inflation expected to rise from its current level of 5.4 per cent to more than 6 per cent.