Martin Lewis: How the new flat rate £200 energy bill loan really works

annabanana82

It'll be interesting to see the figures in 2028, my current household will receive the £200 which we will as a family unit benefit from. 

However, if one or two children were to leave home they would then pay the £40 a year for between 1-5 years.  Divorces will continue and households will become 2 rather than 1. 

The number of homes being built in the next 5 years will be quite a lot. 

Granted some people won't survive the 5 year repayment period but someone will move into their home. 
And some people may unite and go from 2 to 1 households.

But the total repaid is surely likely to surpass the total rebate provided so from this exercise the government will see a profit? 

jrawle

Presumably this will be levied on the energy companies, just as green levies, etc. are and not an itemised £40 debit on everyone's bill. The standing charge element of the price cap will also be £40 higher than it would have been without this levy.

If the market returns to something more like normal in the next five years, it will be up to the companies to set their prices below the cap just as it used to be. How much of the levy they pass on to consumers is up to them. Equally, it they want to continue to charge a higher price after five years, they will be free to do so as long as their default tariff doesn't exceed the price cap.

ProDave

Another scenario.  We get £200 credited to out account in October.  At the end of summer the account is always in credit for the winter bills.  I am uncomfortable at having too much credit on my account in case the supplier goes bust and it becomes a long battle to get that credit back, so my plan would be request that credit is paid back from the supplier immediately in October.

Then in subsequent years I would be happy to increase my payments by £3.33 per month to pay the extra £40 per year.

facade

Just get the credit paid out, and buy £200 of premium bonds. You might win something, or now the Bank of England have raised interest rates, you could even stick it in a savings account.

MWT

ProDave said:

Another scenario.  We get £200 credited to out account in October.  At the end of summer the account is always in credit for the winter bills.  I am uncomfortable at having too much credit on my account in case the supplier goes bust and it becomes a long battle to get that credit back, so my plan would be request that credit is paid back from the supplier immediately in October.

As long as your balance and planned payments exceed the likely cost of the winter energy I'd hope they would be willing to refund it to you, but for anyone not on a fixed tariff, the odds are they are going to want to leave it there or their DD is likely to go up ...

MovingForwards

MWT said:

ProDave said:

Another scenario.  We get £200 credited to out account in October.  At the end of summer the account is always in credit for the winter bills.  I am uncomfortable at having too much credit on my account in case the supplier goes bust and it becomes a long battle to get that credit back, so my plan would be request that credit is paid back from the supplier immediately in October.

As long as your balance and planned payments exceed the likely cost of the winter energy I'd hope they would be willing to refund it to you, but for anyone not on a fixed tariff, the odds are they are going to want to leave it there or their DD is likely to go up ...

I'm not on a fixed tariff. I'd be in credit by over £600 each year if I had a DD set up, even though my supplier has consistent readings.

prowla

So basically bills are going up by £40 extra per year, but the first 5 years are paid back in advance for people who have an account on the scheme's inaugral data.

Dolor

prowla said:

So basically bills are going up by £40 extra per year, but the first 5 years are paid back in advance for people who have an account on the scheme's inaugral data.

 If I was to become a first-time energy user that entered into my first energy contract on the 1st November then the good ship ‘Government £200 CREDIT’ will have already sailed. The ‘good news’ is that I can expect to pay back the £200 as a levy applied to future energy bills. 

In considering whether this is fair or not, remember that there are millions of consumers who have never switched from one of the Big 5 who will end up paying their share of the Consumer Levy and other failed supplier costs on their future bills. 

roseview

Plus we have to pay vat on repayment/levy that we don't want

Grizzlebeard

prowla said:

So basically bills are going up by £40 extra per year, but the first 5 years are paid back in advance for people who have an account on the scheme's inaugral data.

The extra £40/yr levy stops after 5 years( 5 x 40 =200) when the £200 has been re-payed. Giving (Loaning) £200 is like giving a starving child a single sausage and expecting it to nourish them for a year!

How new entrants to the energy market will be treated is one of those little snags they will have to work out. Fodder for another 1000 post long thread on the MSE forum.

Of course, the crisis will almost certainly continue far beyond this year so no doubt other additional measures will have to be put in place some time. Next year we're getting closer to the General Election so expect generous(sounding) schemes from all the Political Parties as Vote-grabbing-bribes.