Martin Lewis has shared what he expects will happen with energy prices for the next year. The money saving expert appeared on ITV's Good Morning Britain on Monday morning and shared his thoughts on how the winter weather in Europe could determine the energy price cap for next year.
It comes after experts predicted that energy bills could be set to fall lower than previously expected this summer. Energy bills for a typical household are predicted to fall to around £2,400 a year from July this year, analysts at Investec have said. You can read more about their predictions here.
With talks of energy bills going down, Martin Lewis explored the likelihood of that happening and more specifically how low they could go. According to the founder of MoneySavingExpert.com, energy bills could rise before falling.
Read more: Energy bills forecast to fall more than expected in the summer
"Let's be very plain, energy bills are set to rise before they fall, they look higher now before they fall," he said. "Look, what's happened is the wholesale rates - the rates of which gas and electricity retailers buy energy off gas and electricity suppliers which make huge profits that people are annoyed about, have dropped.
"People look at the graphs - and there are a lot of graphs that go around on social media, showing that they've jumped rapidly. Well, one of the problems with that is that people are using the wrong graphs, they are looking at the day ahead prices, which are pretty irrelevant in the UK.
"The prices that count here, the closest one is the year ahead. If you look at that, wholesales rates have dropped very rapidly compared to the heights of the start of the Ukraine conflict, but they are still well over three times the traditional run rate that it used to be 18 months or two years ago. Let's not over blow this, well more than three times than what they used to be.
"What we have to remember in the UK, we have nationalised energy prices. The vast majority people in England, Scotland and Wales are on an energy price guarantee tariff, that is where the prices are currently set by the government - not even by the regulator, it is set by the government.
"What we pay right now is staggeringly, even though it is incredibly expensive, even though it has doubled from last winter, is a subsidised rate. If I take somebody on typical usage, even though there is no such thing but it's easier to explain, our bills right now are £2,500 a year on typical use, they would be on £4,279 if they were on the price cap.
"So, the gap between the two of those is the subsidy from the state, the amount that the government has decided the state will pay for everybody, rich or poor, towards their energy bills. While we are on that price cap, a price guarantee tariff of £2,500, on April 1 with the current plan it will go up to £3,000 so everyone will see a 20% rise. Then it will stay at £3,000 for a year until April 1, 2024.
"The only chance it will get cheaper is if the energy price cap, which is the price the regulator uses to set and that is currently the one for £4,200, were to drop below the energy price guarantee. Now the prediction based on current wholesale rate and the energy price cap is set on wholesale rates - this is the one that might get lower. Is it in April? No. But from July, because it moves every three months, depending which company's predictions you look at, this £3,000 could drop to somewhere between £2,500 and £2,800.
"Remember, we are currently paying £2,500 so when everybody says it's going to get lower in July, it will get lower than the planned £3,000, but the likelihood of current rates is it will still be higher than what we are paying right now and it will stay that way in October onwards.
"So the talk of energy prices going down - they will go up and then they will come down, but the likelihood is that they will still be higher than they are now unless the wholesale rate continues to fall, in which case it will come down a little bit further."
The money saving expert show - The Martin Lewis Money Show Live, is set to air on ITV this week. Ahead of his programme on Tuesday, the expert shared what he would be focusing on in the TV show. He said: "It's all about cutting the cost of debts, sadly the numbers came out from the Bank of England that we have higher credit card increased borrowing in the UK than any time since 2004.
"It really concerns me that people are borrowing willy-nilly to fill the gaps, but that is what they are doing. If you are using your credit card because of the cost of living, the question you have to ask yourself is: what's going to change that means that I am able to pay back on top of meeting the rest of my cost of living?
"I'm going to go through how to go about cutting the cost of all of your debts, overdrafts, loans, credit cards - absolutely down to the bone, so you pay a minimum interest and as much of your money goes to clearing the debt. One final thing to remember on energy, the big thing we are looking for is a relatively warm winter in Europe.
"If European gas storage stays above 50% then our energy prices will likely be cheaper next year than they are this year. If it drops below 20%, then things are going to be far worse than they were this year. It's looking pretty good at the moment, but we are not through to the end of the winter.
"Bizarrely, what we are really watching is the winter weather in Europe is what's going to dictate energy prices in this country and what is going to dictate energy prices next winter, whether those prices continue to drop or go back up again."
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