Money Saving Expert Martin Lewis, 46, appeared on This Morning today to warn people a hike in energy price caps is looking likely on 1st April. Martin explained the majority of people still on their energy provider’s standard tariff will probably soon see an increase in energy costs and could be wasting over £200 per year. Instead of a cap on prices, it’s the caps rate that will change. But what does this mean? Martin Lewis explained all on ITV today with Holly Willoughby and Phillip Schofield.
How does the price cap work?
Martin warned viewers: “It launched on 1st January. It’s not actually a cap on prices. Instead, it caps the rate charged. Some have reported the cap is £1,137 per year as the max anyone will pay – that is untrue.
“Your cap depends on your usage. The £1,137 per year average figure is what the cap would be for someone with typical usage. If you use more, your cap will be higher. Use less, and it’s lower.”
There’s been no official announcement, why does Martin think it will rise?
The Money Saving Expert continued: “First it’s worth saying that while the introduction of the price cap reduced many standard tariffs by 10 percent, switching would’ve saved around 25 percent.
“Yet more importantly the first price cap rate only lasts from 1st Jan to 31st March after which it changes and then it’s reviewed every six months by the regulator Ofgem. It bases the cap on a published formula about wholesale prices (what energy firms pay) over a six month period, the latest of which ends at the end of January.”
Martin added: “As that period is nearly over, and prices have risen hugely over that time, we can now pretty accurately predict the cap will rise by about 10 percent in April. So for someone with typical use it’ll rise from £1,137 per year to about £1,240 per year.
“All the big six prices are currently within a quid or two of the cap, and will almost certainly jump with it as their prices before the cap were around that level.”
How to find and switch to the cheapest tariffs
The financial expert added that the cheapest provider is currently Avro, saying: “Right now the cheapest one year fix is around £990 per year with Avro – which means you’re guaranteed to avoid the price hike – but I can’t say that’s the cheapest tariff for everyone.
“That’s because your cheapest depends on where you live and what you use, there’s no one winner.
“So plug your details into Martin’s ‘Cheap Energy Club’ or any other Ofgem-approved comparison site and in minutes it’ll give the best deal for you – it will also let you choose based on whether you want green energy, to fix longer or a range of other variables.
“It’s best if you have your bills to hand to do this, but even if not, most comparison sites will estimate for you and the sin of inaccuracy isn’t as big as the sin of doing nothing. And it takes just 17 days for the switch to complete.
“If you’re in Northern Ireland you can do a comparison via Cheap NI Electricity or the Consumer Council for Northern Ireland’s tool.”
What if people’s cheapest provider are from firms they haven’t heard of?
Martin warned viewers: “The solution to this is simple – scroll down! Just scroll down the comparison site results to one you know, or one which has a good customer service feedback rating (some allow you to filter by this). The savings can still be over £200 – and if you’re nervous better to go for that.
“And even if you won’t switch company every big six provider has a cheaper deal than its standard tariff. For example currently British Gas’s standard tariff is £1,135 but its cheapest ‘Energy Plus Protection’ tariff which is fixed till Jan next year is £1,052 – so around £80 cheaper and includes free basic boiler cover – though you have to apply for this via a comparison site.”
Can you switch if you’re on a prepayment meter?
The Money Saving Expert said those on prepayment meters can still make savings, adding: “There’s nowhere near as much competition, and you generally pay more – though prices have been capped which has helped a touch. If you do a comparison there are often savings to be made, but often less than £100.”
However, he recommended: “If you can, try and switch to a billed meter. It’s free to do with one of the big six providers, and you’ll usually be credit scored to check you’re capable of keeping up with payments.”