Martin Lewis has warned householders to consider fixing their energy bills as costs of living continue to soar. The MoneySavingExpert shared the advice on his Ask Martin Lewis podcast saying "now is the time" for many households to act on their bills after months of nowhere to escape rising energy costs.
The energy price cap is the limit to what energy companies in the UK can charge for their standard variable energy tariffs. The vast majority of households – around 70% – are currently on a price cap tariff as there are no cheaper alternatives available. However Martin said that for the first time so far in 2022 this has now changed, with some tariffs available for most households.
"In April the cap went up 54% taking it to £1,971 a year for somebody on typical use," he said. "The next cap moves on October 1 and lasts until the end of December. The prediction of what's going to happen there is pretty strong because that cap is based on wholesale prices from February until the end of August.
Read more: Energy bills could rise or fall every three months under Ofgem price cap rule change
"In May the regulator Ofgem said [the cap] would be up 42% to around £2,800 a year on typical use. But the latest prediction I have from Cornwall Insight, who I tend to think are pretty good at this, they've been right mostly in the past, is that it's actually gone up. It's now likely to be up 46% taking it to £2,880 per year on typical use."
Another rise of about 1% is predicted in January, which will change again in April. Mr Lewis said the prediction for this was far weaker but that indications showed the cap might actually drop by about 10%. But he said this would still only bring it down to £2,600 – significantly more than people are paying right now.
"If we take all that together... and adjust it for the fact we will use more in the winter then on average over the next 12 months you will be paying 35% more than you do right now. That is what you have to remember."
Mr Lewis explained that if you are offered one year's fix at no more than 35% over your current price cap tariff, or 40% more if you value more budget certainty, then that would be worth considering. "I need to stress to everyone there's crystal ball-gazing here. It can only be a best guess. My best guess of the equation right now – a fix no more than 35% over the current price, compared to the price cap, is probably worth it. Or, if you really want budgeting certainty, no more than 40% above."
He said the UK was in an "absolute energy bills crisis in a way we've never seen" and added that while it was not the first day that there had been tariffs worth considering until now most of these had only been available to companies' existing customers. "This week though the cheapest open market fix, which is a fix anyone on direct debits can switch to, just about scraped into the equation because it isn't more than 40% over the price cap. It is pricy though so it's only for those who want price certainty or are desperate to leave their existing provider."
Mr Lewis added another caveat saying regulations meant firms to not need to publish details of these rates, meaning it was difficult for him to give full details of what was available. "So the way that we've got hold them is by asking you to send them into us so we can analyse them. But because we don't have the full details we can only analyse them based on average prices and nobody is on an average price so what you will have to do is find out yourself what your rise is."
He said the following rates would currently be worth considering:
For existing customers:
EDF: Fix Total Service May24v3/Fix Total Service May24v4 two-year fixes - on average 24% more than the current price cap
E.on/E.on Next: Fixed Online v14/Next Online v14 one-year fix- 30% more than the price cap
Ovo Energy: Better Energy 31 May 31, 2022 one-year fix: 32% more than the price cap
British Gas: Loyalty June23 v1 one-year fix/British Gas: Exclusive June23 v1 (for customers moved to British Gas when their firm went out of business): 32% more than the price cap
Cheapest open-market deal:
Ovo Energy: Better Smart May 25, 2022 one-year fix: 38 % more than the price cap
"This is only for people whose own firm isn't offering them an existing customer fix and who really want price certainty or perhaps hate the customer service where they are and want to ditch it and go elsewhere," he said of the latter rate.
"If you're doing an existing customer fix my numbers are based on averages. Your own situation must be different. So you need to ask [your provider]: 'How much more will I pay compared to the current price cap on this fix?'
"I don't have a crystal ball. What I would say to you is if you do want price certainty the cheapest existing customer fixes now give you that but you'll pay more in the short term. And if things were to drop radically in the future it might not be a good deal in hindsight.
"But if you're in doubt then there is nothing wrong with playing safe and sticking on the price cap and paying less in the short term. There is no hard and fast answer here."
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