MoneySavingExpert founder Martin Lewis has provided Britons advice on the cheapest way to pay for their energy bills, after October's price cap rise was finally confirmed.
Ofgem - who are the regulatory body for gas and electricity prices in the UK - announced that their price cap will rise to £3,549 from October 1. This is an 80 per cent increase on the current maximum of £1,971.
But writing in his latest MoneySavingExpert email, Martin explained that the price cap can vary depending on your method of payment for fuel.
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The Mirror reports that the £3,549 figure applies to households on default tariffs who choose to pay by direct debit, while those paying on prepayment meters (typically more vulnerable households or those struggling to afford energy) there is a marginally larger jump from £2,017 to £3,608.
Standard credit customers who pay upon receipt of a traditional bill, will also see their price cap rise from £2,100 to £3,764 - which means that the direct debit is not only the cheapest way of paying for dual fuels, but it also allows you to know exactly how much is coming and going from your bank account each month.
The downside is that direct debits are usually based upon how much energy your provider estimates you are consuming, and it's important that yours isn’t overestimating this, or else you could end up paying more than necessary. The best way to create accuracy is by providing regular meter readings and submitting them as and when you can.
If you feel as though you're being overcharged, it is advised that you speak to your supplier and enquire about a breakdown of charges. Ofgem licence conditions set out guidelines for 'fair and reasonable' direct debits - which means that your supplier must take the necessary requirements to ensure that you're being charged correctly.
“The prepay cap is 2 per cent more than direct debit, receipt of bills 6 per cent more. It can vary by firm - we're going to do some work on that,” said Martin.
“Ditching direct debit may help with your cash flow if your direct debit is set too high… but it's important to understand that in the long run you'll pay more, whereas if you overpay while on direct debit you're eventually due that money back.”
It is estimated that some 24 million households are covered by the energy price cap, including four million on prepayment meters alone. The cap sets a mandatory limit on the rates a supplier can charge for each unit of gas or electricity used, while also setting a maximum rate for the daily standing charge - which is a fee you part ways with to have your home connected to the network.
Read next:
- Martin Lewis warns Brits not to cancel direct debits as Ofgem's energy price cap soars
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Why pay-as-you-go meter and quarterly bill payers face a higher energy cap rise than direct debit
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Energy bills to soar as Ofgem confirms price cap will rise to £3,549
