Martin Lewis has shared some tips ahead of the new energy price cap expected to be confirmed by Ofgem on Thursday morning. The industry regulator is expected to announce a £450 drop to its energy price cap from July 1, but there have been warnings that people are likely to feel little benefit to their household finances.
Writing in the latest edition of the MoneySavingExpert.com newsletter (MSE.com), Martin said Cornwall Insight predicted the price cap would “likely drop 35 - 40 per cent, but what we pay will drop an average 15 - 20 per cent”. In monetary-terms, this would be a decrease of £446 on the UK Government’s £2,500 Energy price Guarantee, taking it to £2,054 a year - based on falling wholesale energy prices.
The cap is mostly based on wholesale energy rates from mid-Feb to mid-May. However, he has reminded people that it it's a cap on the underlying rates, so if you use more, you pay more, reports The Daily Record.
Read more: Energy bills predicted to remain high for the rest of the decade
The financial guru has now shared some 'need to know' tips ahead of the change in July, you can read the full details on MSE.COM here.
1. What we pay will come down considerably. Ofgem recently confirmed to Martin during last Wednesday’s Good Morning Britain that “what we currently pay will come down considerably" - but he wouldn’t commit to the new rate.
2. Price Cap rates will likely drop 35 - 40%, but what we pay will drop an average 15 - 20%. Money Saving Expert explained that since October we have been paying a lower rate set by Government called the Energy Price Guarantee which kicks in when the Price Cap is too high - the state pays the difference. From July, the new lower Cap will be under the Guarantee level, so we'll pay that.
3. We will pay similar next winter to the one just gone. Martin explained: “For most, the drop in the rate paid won't make up for last winter's £66-per-month support. Lower users will fare worst, as the £66 was proportionately a bigger reduction on their bills.”
4. More support for lower to middle income houses is unliklely. Martin also said that further government support for lower to middle income households was “unlikely”, but thought we were likely to see more fixed-tariff offers starting to appear on the market.
5. High standing charges likely to remain. It's likely it's the unit rate (cost of gas/elec) not the daily standing charge that will drop. Martin said: "In my view, this leaves a moral hazard that the less you use, the less you save. I have lobbied Ofgem hard on this, sadly to little avail."
6. Will there be fixes? From Thursday it is expected that there will be some short term price certainty. However, he said: "Based on current predictions, if any firm offers a fix for not much more than the July Price Cap, for the sake of certainty it's worth considering."
7. Some prepay payers should run down credit before July. "If you've a non-smart prepay electricity meter, as you usually pay the rate from the day you top up, aim to run your credit down to the minimum by 1 July, and then top up (even a quid) to kick-start the new cheaper rates."
8. There are cost-of-living payments to come for those on benefits, with disabilities, and state pensioners. The first £301 benefits payment (of £900 total) has been paid.
Earlier this week energy market analysts said they didn't expect costs to return to pre-crisis levels until the end of the decade. Cornwall Insight has announced its final forecast for the next quarter's price cap, which is due to be announced by regulator Ofgem on May 25. You can get more consumer news and other story updates straight to your inbox by subscribing to our newsletters here.
It predicts that the cap for the July to September period will be set at £2,053 for a typical household. This is an average figure and does not mean households will pay no more than that per year, as the cap is per unit of energy used.
If it proves to be accurate, it will mark a significant fall from the current cap of £3,280 for April to June. However, average bills were capped at £2,500 by the Government's Energy Price Guarantee (EPG). The predicted fall to £2,053 from July will bring the cap under the EPG.
While the fall is sure to be welcomed by hard-pressed households, it will still be well above the pre-crisis cap of £1,277 seen in October, 2021.
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