Martin Lewis has welcomed Ofgem’s announcement to lower the energy price cap by 17 per cent from July 1, however, he also warned millions of households will still be paying more for their gas and electricity bills this winter. The consumer champion explained this is due to the removal of the UK Government’s £400 Energy Bills Support Scheme, which provided an automatic discount of either £66 or £67 for millions of households between October 2022 and March 2023.
Martin said: “Apart from those with high use, the drop in the rates doesn’t make up for the £66 per month state support people got until April - and most are on monthly Direct Debit, which means they pay the same in summer as winter. Overall, this still leaves people paying double or more what they did before the energy crisis hit in October 2021.”
The founder of MoneySavingExpert.com was on co-hosting duties on Thursday to offer reaction and insight to the energy regulator’s new price cap shortly after it was announced that the price cap will fall from £3,280 to £2,074 from July 1. This means households with average, typical usage will see energy bills fall by £426 a year from this summer.
Households have been partly shielded from the most recent rise in prices by the Government’s Energy Price Guarantee, which limited annual energy costs to £2,500 for the average household - subsidising Ofgem’s price cap. Ofgem’s latest cut means its cap will again govern household bills, resulting in a reduction of £426 from £2,500 to £2,074 - a fall of about 17 per cent.
To help people understand the real-terms impact of the new price cap, Martin said that for every £100 per month customers pay today, they will typically be paying £83 per month from July.
He explained: “The fact the state is paying far less than planned to support people’s bills means there is some wriggle room here for targeted support for another hard winter coming for those who are just above the benefits threshold. Though I’m not holding out much hope that it’ll happen.
"The moral hazard of high standing charges continues too. The reduction is all off the unit rate. It will still cost roughly £300 per year just for the facility of having gas and electricity. This perversely means the less you use, the less you save. I and many others have pushed Ofgem on this, to little avail, though it is launching a consultation on operating costs which impact this and may help a bit in the future."
Meter readings before new price cap starts
Martin is also urging all households on a standard tariff to take a meter reading before July 1.
He explained: “Virtually all households on standard tariffs will see prices change when the Price Cap falls on 1 July. So unless you’re on a smart meter which does it for you, it’s worth doing a meter reading around that date to draw a line in the sand to show how much energy you actually used on the current higher rate, and how much you used on the new cheaper rates.”
He added: “It stops your supplier from estimating usage and potentially assuming that you’ve used more at the higher rate than you actually have."
The financial guru also shared key tips for those on a fixed rate tariff or prepayment meter.
Fixed rates
Martin said: “This time last year, with prices rocketing, some people took very high fixed rate deals. Then the government launched the Energy Price Guarantee, and for fairness, those whose fixes were more expensive than the EPG had their tariffs subsidised so they dropped to the same level. From July as the EPG subsidy will be set as zero, that subsidy will be removed and those fixes will go back to their original price.
"For people on those fixes, it is worth considering switching to a price capped standard tariff - possibly even if you need to pay exit fees. Though if you’re coming to the end of a fix you don’t pay exit fees in the last 49 days of the fix."
Prepayment meter customers
Martin explained that prepayment rates are due to drop in July by a larger amount than direct debit, roughly 18 per cent, as for the first time the prepayment Price Cap will be at the same level as the one for direct debit.
Most of that is due to a change in how costs are allocated, and a small amount will be UK Government subsidy.
He said: “With most prepayment meters - both smart meters and all gas meters - you pay the rate on the day you use energy. Yet with many non-smart, prepay electricity meters, you pay the rate on the day you top up - so customers with those should be aiming to run their credit down towards the end of June, to have as little in on 1 July when prices get cheaper. Then top up on 1 July - even just a quid - so you’re then on the new lower rates."
Martin will be discussing the energy price cap on BBC Radio 5 Live with Nihal Arthanayake this afternoon from 1pm - listen here. The Martin Lewis Podcast will be released shortly after the show airs.
To keep up to date with the latest energy news, join our Money Saving Scotland Facebook page here, follow us on Twitter @Record_Money, or subscribe to our newsletter which goes out Monday to Friday - sign up here.
READ NEXT
Martin Lewis urges more than 100k energy customers to check for £60 compensation payout
Martin Lewis issues urgent warning to every person with credit on their energy bill account
People over State Pension age can claim up to £600 winter heating bill help from September
- Five worst electronics to leave on as vampire devices add '£75 to energy bills'
New calls for £400 energy bill discount to be reintroduced to help households this winter
