Energy bills are set to sky-rocket from £1,971 to £3,549 in October.
(Picture: PA)Martin Lewis has warned households who have just fixed their energy deal to be prepared to cancel in order to save money. Though the Government has not confirmed any details yet, new Prime Minister Liz Truss could soon announce a freeze on energy bills at around £2,500 per household.
This would come after a £400 energy discount was recently offered to households.
It’s expected that the UK could have the “winter from hell”, according to energy bosses, with energy bills set to rise even more this autumn.
Stephen Fitzpatrick, founder of OVO Energy, which is the UK’s third biggest energy company with 4.5 million customers, called for “very bold” action to help shield families from the “worst of the price rises”.
Millions of people are set to see their energy bills sky-rocket from £1,971 to £3,549 in October, and then possibly soar even higher.
However, Martin Lewis has crucially pointed out that a freeze would not apply to those with a fixed rate energy deal.
The Ofgem price cap only applies to those on variable rate energy deals, that’s around 80% of the country, or 24million people.
Many energy users have recently locked in to fixed rate deals and may not benefit from any price cap freeze.
On the MoneySavingExpert site, he wrote: “If you fixed within the last 14 days, do check when the cooling off period ends, as on Thursday when we hopefully know what’s actually happening you may want to cancel.”
Anticipating the next price cap rise, up to 15% of households have taken out fixed rate deals higher than the current price cap, assuming it would save them money in the long run.
However, if Truss does freeze the price cap, fixed rate customers face paying above-average energy bills as a result, making for a very costly winter.
For people who fixed more than 14 days ago, Lewis said: “The ‘should I fix’ call has never been easy. That’s one reason when explaining the level it’s worth considering at, I’ve always described as ‘crystal ball gazing’ with no way to know if it’s the right call.”
“Some who have made the call to fix recently may feel frustrated by this.
“Yet ultimately remember, you made the call based on the information available at the time, that’s all you can do, it was a good decision for you based on what you knew, even if the outcome doesn’t turn out to be the best.”
How is the Ofgem energy price cap determined?
Ofgem first introduced the price cap in 2019 and it is based on a number of factors including the wholesale cost of power, which is why it has recently increased.
The cost of wholesale gas rose rapidly after the Covid-19 pandemic, with suppliers pushing the increase onto customers. Businesses being shut down led to low global energy consumption, which was then followed by a rapid bounceback as the economy began to open up again.
Prices have also risen further following the Russian invasion of Ukraine which caused major trade and production disruptions and a knock on effect on the UK’s energy bills.
