Martin Lewis has issued an important update for millions of people who have fixed their energy bills. The Money Saving Expert issued his latest advice after new prime minister Liz Truss revealed a major plan last week aimed at tackling soaring energy bills.
The proposals, worth up to a £150bn, will see the typical household energy bill capped at £2,500 for a two-year period and will be paid for through borrowing. They will also include a scheme offering "equivalent support" to businesses and a controversial end to fracking. You read everything you need to know about the Prime Minister's energy plan here.
In the wake of the announcement Martin Lewis originally suggested customers on a fixed rate energy bill should consider looking for a new fixed tariff energy deal before October. At the time he explained that no fixed tariffs are meaningfully cheaper than current deals, but they will be if the predicted October hikes in price go ahead.
Read more: UK inflation rate falls slightly but remains near 40-year high
However, new information which has been released means that advice has now been updated. Speaking on MoneySavingExpert.com, Mr Lewis said on fixed deals: "Technically the price guarantee for standard tariffs is done as a reduction to the planned October unit rates. The government has said from October 1 the same 4p/kWh gas, and 17p/kWh electricity reduction will apply to many (not all) fixed rates too. That's very roughly in the ballpark of a 30% decrease.
"My latest reading (the rules aren't finalised) is the reduction will only apply to fixes that will be more expensive than the price guarantee. Energy providers also tell us that their understanding of the government's rules (so far) is that higher fixed rates should at most only reduce to the level of the new guarantee."
Mr Lewis explained what this was likely to mean for those on different fixed rates:
- Very cheap fix: (for example, a two-year fix from before crisis started). If you'll pay less than the new price guarantee, there's no reduction.
- Mid-level fix: (for example, fixed three to nine months ago at a premium). If your fix is higher than the new price guarantee, it will reduce to the same level as the new price guarantee.
- High-rate fix: (for example, fixed very recently at high rate to forestall predicted future huge hikes). Your fixed rate will reduce substantially but a few of these may still be costlier than the price guarantee.
Mr Lewis also warned customers not to ring their energy providers to ask them how their current fix compares to the new price guarantee, as most firms simply don't have enough detail on the rates. "Energy firms don't have the final details. So don't call - it'll be a pointless phone queue - I'll update you when we know."
Mr Lewis also issued an important update on exit penalties for those wanting to leave their fixed tariffs and move onto a cheaper rate. He said he had met with the major energy companies who had confirmed that customers at a higher fixed rate would be allowed to move onto the price guarantee without penalty for a certain period of time.
"Today in the energy summit at MSE Towers with the big firms' CEOs, all firms there - Brit Gas, Ovo (SSE), Octopus, EDF, E.on, Shell - agreed to my request that customers who end up on fixes at a higher rate than the price guarantee will be allowed to move on to that firm's price guarantee tariff, with no early exit penalties, until at least November 15 (some beyond that)," he said. "Note Scottish Power chooses not to attend the summits.
"Most will also in time communicate to the small number of people in this position before that deadline and offer them the chance to move, once they know (again it's too early now, and you may be charged exit fees before things are firmed up, so - while frustrating - it's probably easiest for most to wait for now).
"Yet remember most fixes will likely be the same or cheaper than the price guarantee, in which case you won't need to do anything. And of course we'll compile firm-by-firm info when we get it in the price guarantee for fixed prices guide."
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