Martin Lewis has shared "12 things everyone needs to know about the energy price cap" ahead of the increase in October.
On October 1, the price cap will rise and households across Scotland and the UK will be paying more for their energy.
With the cost of living crisis continuing to worsen, people have been looking for ways to cut back on everyday costs in order to brace for the higher energy bills this winter.
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MoneySavingExpert co-founder Martin Lewis has been sharing advice to households on how their can minimise the impact of the impending energy price cap rise.
Taking to Twitter, Lewis wrote: "12 things everyone needs to know about the energy price cap hike... Includes - how much will your bill rise calc - will it rise again? - standing charge - should you fix? - where to get help if you're struggling."
He also shared a link to a MoneySavingExpert page that includes a full breakdown of the tips, which can be found here. Read on for a summary of the information.
1. The cap will rise an average 80% in Oct.
Households that are not on a fixed energy tariff are likely on their provider's default standard variable tariff, which is 'protected' by the price cap.
According to Lewis, the price cap is "somewhat misnamed". He writes: "In truth, there is NO CAP ON THE MAX YOU PAY FOR ENERGY, it's actually on the underlying rates, so use more and you pay more, plus the cap varies by region..."
2. It is actually a cap on standing charges and unit rates
In real-life terms, the cap is a limit to the standing (daily) charge firms can levy, and the rate paid for each unit of energy consumed.
3. You will pay £273/yr even if you use no energy.
Even without using any gas and electricity, the average price cap standing charge is £273 per year — after rising in April.
Lewis added: "I have continually pushed back with Ofgem to try and get this changed, but with little success."
4. On 1 Jan, the price cap will likely rise a FURTHER 50% - take any predictions for after that with a pinch of salt.
According to Lewis, Ofgem determines the price cap through a published formula, with the primary variable being the publicly available year-ahead wholesale energy rates.
The price cap in October will only be in place for three months, after Ofgem shortened the time period between energy price cap changes from six months.
5. Direct debit is still the cheapest way to pay.
Lewis has advised that direct debit remains the cheapest way to pay for your energy, as the price cap is dependent on your payment method.
He stated that the new average price cap rate for a household on typical use will rise 80 per cent from £1,971 to £3,549 per year if paying via direct debit, and 79 percent from £2,017 to £3,608 per year if paying via prepayment.
He added: "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."
6. Should you fix?
Lewis said it "may be worth it" to find a fix since projections are that the price cap will be approximately 145 per cent more than it is now over the next year. However, he added that there is "a lot of crystal ball gazing in this, so we can never be, and have never promised to be, right".
7. Can you reduce your energy usage?
The financial expert reiterated that "cutting use cuts bills", and said that there are a number of cuts that can be made around the house in order to improve efficiency that "don't impact lifestyle too much".
He also shared links to an energy saving tips guide, an energy mythbusting guide, and a heat the human not the home guide.
8. Suppliers will knock £400 off every energy bill over the next six months.
Earlier this year, the UK Government unveiled a non-repayable grant to come off electricity bills, paid at roughly £66 a month from October to March. While some households will receive the money directly into the accounts, others will have their direct debits reduced, while those on prepayment meters will be issued vouchers.
9. Money for those on benefits, with disabilities & pensioners.
As well as the £400 energy rebate, there is additional financial help available to those on benefits, those with a disability or long-term health condition, and pensioners.
Benefits claimants may be eligible for a one-off £650 payment, those with a disability or long-term physical or mental health condition may qualify for a £150 top-up, and pensions could be eligible for a £300 boost.
10. What to do if you're struggling now, or will be in October?
Lewis advised that those struggling with their bills should get in touch with their energy supplier, being "polite and straight" with them and explaining that they are vulnerable.
He also shared a guide on what to do if you're struggling to pay energy bills, which contains energy and debt help charities that may be able to offer assistance.
11. If you can, start putting money aside now.
While Lewis acknowledged that this may "be a pipe dream for many", he urged those who are able to start putting money aside for the winter. He also suggested "unbelievably, asking for your energy direct debit to rise should ease the winter cash-flow pain".
12. It's tough to save on energy bills, but many can still make large savings elsewhere.
While many household budgets are stretched as thin as they can go, others may be unaware they they can save by cutting back on their outgoings.
Lewis also suggested that households who earn less than £40,000 do a 10-minute benefits eligibility checker to see if they qualify for money from the government.
More information can be found here.
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