Martin Lewis shared 15 points of advice after New Prime Minister Liz Truss announced the energy price cap will be frozen at £2,500. As reported by the Liverpool Echo, finance guru Martin reacted to the announcement with some 'need to know' points.
They include confirmation that anyone who has recently moved onto a more expensive fixed deal will be able to move contracts without any exit penalties. Martin said: "I've been told this directly by the Secretary of State for Business as it's what I was arguing for.
"Those on fixes, can either stay on them, or can leave and switch to the new state subsidised tariffs with no exit penalties.'" The founder of MoneySavingExpert has been issuing advice to energy customers throughout the cost-of-living crisis.
His 15 points on the energy scheme are:
- The new price guarantee starts October 1, and for someone on typical use will be £2,500/yr and last for two years
- The current price cap is £1, 971/yr rate at typical use and was due to rise to £3,549 (and likely £5,400 in January). It was £l,277/yr last winter
- This will be a cap on standing charges & unit rates, so use less you pay less, use more you pay more. There is not total cap on what you pay, the typical rate is just a figure for illustration.
- The new lower price cap includes getting rid of the green levies
- The £400 payment to all homes (paid as £66 a month over winter) will continue
- That will take the average payment to £2,100/yr
- To estimate what you’ll pay, over a year, multiply current costs by 6.5% (each £100 becomes £106.50) this includes the £400 discount (but not other payments)
- For those with lower than typical bills, the % increase will be lower, for higher users higher (as the £400 payment is flat regardless of use, so has a bigger proportionate reduction on lower usage)
- The £650 payments to those on many benefits will continue (half’s already been paid)
- As will the £150 to those with disabilities and £300 to pensioners.
- There's no announcement on whether these payments will be in place next winter, I suspect the political reality is at least for benefits recipients, similar will be paid next year.
- VAT is not being reduced in this announcement, but there is a chance (50 — 50 I'd say) that may happen in the Chancellor’s fiscal statement next week.
- For those on LPG and heating oil there. I’m told there will be discretionary payments to help them too
- For those in park homes and who pay directly, I’m told they should benefit from the new business help
- Those on fixes, can either stay on them, or can leave and switch to the new state subsidised tariffs with no exit penalties.
The Government will wait until an emergency budget this month to set out how much the vast intervention will cost, but estimates suggest it could be up to £150bn. It will be funded by extra public borrowing - eventually piling the cost onto taxpayers.
The Government will also remove green tax levies, worth £150, from energy bills but say they will continue to fund projects to boost renewables. Ministers will press on with a £400 bills discount that has already been announced.
Together, the moves should mean the amount average households pay is close to the current £1,971 price cap, which rose last April. The Treasury estimates the measures will knock up to 5% off inflation forecasts.
Ms Truss told the House of Commons today her plan will see the Ofgem price cap replaced with a 'two-year energy price cap guarantee.' This will see a typical UK household pay no more than £2,500 per year on energy bills for two years from October 1.
A scheme for businesses, schools, hospitals, other public organisations and charities will "offer equivalent support" but will last for just six months. "Vulnerable" industries will receive longer-term support and a review in three months will decide which sectors should receive ongoing help.
