The average price homes will be charged for each unit of gas and electricity, once energy bills are frozen next month, has been released.

New prime minister Liz Truss has announced a rescue package to help people with the soaring cost of energy bills, which involves freezing prices from October 1, and the government stepping in to bridge the gap between what households will then pay and the true cost of energy being charged by companies.

The government's plan will now limit next month's bill increase to £2,500 for the average household with a typical-sized bill - so while £500 more than most of us are paying now it will be £1,000 less than what was expected.

This cap doesn't freeze the overall amount you pay, but instead freezes the price for the units of energy used, and so those who use more energy will pay more than the average £2,500 while those who use less gas and electric will pay less than the average bill payer each month.

The bill freeze has also been put in place for two years and so will also steer people away from additional increases next year, that would have been caused by an increase to the price cap, which could have seen average bills sky rocket to close to £5,000.

New gas and electric unit prices

But the actual unit price customers will pay for their gas and electricity from next month has now also been confirmed for those currently on a standard variable tariff.

With the absence of many fixed-rate deals in the last 12 months, which lock people into paying a set amount for each unit of gas and electricity that can't change until their contract ends unless they wish to pay an exit fee to leave the arrangement, around 80% of domestic customers are thought to currently be on their supplier's standard tariff and subject to fluctuating prices.
From October 1 the planned bill freeze will mean the average unit price duel fuel customers will pay - using direct debit - will be limited to 34p for every kWh of electricity and 10.3p/kWh for gas, inclusive of VAT.

These unit prices, says the Department for Business, Energy & Industrial Strategy, have now been passed to suppliers to ensure that they are used to calculate bills in time for the change in October.

Average standing charges will remain in line with the levels already set by Ofgem for the price cap, at 46p per day for electricity and 28p per day for gas, for a typical dual fuel customer paying by direct debit.

Standing charges operate rather like line rental and are added to most gas and electricity bills as a fixed daily amount you pay, no matter how much energy you use. This covers the cost of supplying your property with gas and electricity albeit they are subject to regional variations and so standing charges differ for customers depending on where they live.

Energy suppliers, say ministers, will adjust the prices of their standard variable tariffs automatically for customers and so households do not need to do anything before October to make sure they benefit from the rescue scheme.

What about homes on a fixed-rate deal?

If you're on a fixed rate tariff, which is costing you more because of rising energy prices, then the locked-in unit price you pay for gas and electric will also be reduced, according to the new policy set out by the government.

Unit prices for those on fixed deals will be reduced by 17p/kWh for electricity and cut by 4.2p/kWh for gas - with these changes also being passed onto suppliers to enable them to adjust next month's bills for their fixed-rate customers.

While energy suppliers will now alter fixed rate tariffs automatically to bring prices down for households, the arrangement is less clear for those on fixed deals which are already proving to be cheaper than the soon-to-be frozen bill price.

It remains unclear whether those on fixed tariffs who have a deal that means they'll pay less for gas and electricity come October 1 - even before any discount to their unit price is applied - will also see their unit prices taken down even further and their bills come down more or whether their existing price arrangement will simply stay as it is.

Homes not on standard gas or electricity contracts, such as those living in park homes, on heat networks or using an alternative source, will be no worse off, promise ministers, and will receive comparable support through a discretionary fund which is in the pipeline. These details however, have yet to be confirmed.