MARTIN Lewis has explained whether you should lock in to a fixed deal for your energy as prices are set to rise.
Millions of people on standard variable tariffs are set to see their bills rise by hundreds of pounds from April 1.
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That’s because the price cap will go up by nearly £700 for the average dual fuel bill.
A price cap set by the energy regulator Ofgem limits the average charge for gas and electric.
The current price cap of £1,277 is reviewed twice a year and the next rise will come in April to £1,925.
And a further rise in October could see it hit £3,000, experts have warned.
Fixed deals used to be cheaper than the price cap, but are now more expensive.
So for the majority of people it’s cheaper to revert to a standard variable tariff which is price capped.
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Now Martin has created a handy video to help confused billpayers with the “big question” of “at what rate is it worth getting a cheap fix?”.
Featuring in the Money Saving Expert newsletter this week, he explained his “rule of thumb” for working this out.
He said: “I would not switch to a fixed deal unless it was less than 75% more than the current price cap, or if you want to base it on the April price cap, no more than 15% more than the April price cap.”
The current price cap is £1,277 and will be £1,925 from April 1. Wholesale gas prices are rocketing and could push that higher in October when the cap is reviewed again.
Martin said customers are unlikely to find deals with prices like this on comparison sites.
He said: “There are no open market options close to that price – they’re all 40% more than the April price cap at the very cheapest.”
Instead you should keep an eye out for offers from your supplier as some are doing offers for existing customers.
E.On offered a top deal to customers earlier this week that let them fix at the new price cap, potentially avoiding any price rise in future.
But it was quickly pulled due to the high demand.
Martin advised that if you’re offered a one-year fix at the April price cap amount then it’s likely worth snapping up.
However a longer fix is hard to determine as prices are predicted to drop again in April 2023 – but that’s by no means certain.
Martin said: “But if you want price certainty and you’re willing to pay a little bit more in the short term, just in case prices continue to explode, I don’t think it’s a bad decision, I just can’t tell you it’s the right move.”
£3,000 energy bills
Budget-busting rises have already hit many households as the cost of wholesale gas has shot up this winter.
And they are expected to rise further in October the next time the price cap review comes in.
Experts have predicted that bills could hit £3,000 because of the situation in Ukraine.
Gas prices jumped today, more than doubling and passing 400 pence per therm, the unit used to measures volumes of natural gas.
“Wholesale prices make up between 40-50% of household bills,” said David Cox, and independent energy analyst speaking to the BBC.
“If these high prices stay around 400 pence per therm we may see the price cap head closer to £3,000 per year, which is terrifying.”
The price cap is reviewed twice a year and takes into account wholesale costs.
Prices were rising already rocketing before the Russian invasion of Ukraine.
The nation is one of the biggest producers of gas and oil.
While Britain only imports around 5% of it’s gas from Russia, the UK relies on pipelines that run through Belarus, Poland, Ukraine and into Germany.
Energy bill help if you’re struggling
There are schemes offered by suppliers, local councils, charities and the government that could also help.
If you’re struggling with energy costs or other bills there are plenty of organisations where you can seek advice for free, including:
You should speak to your energy supplier in the first instance as they have schemes in place to help with bills and arrears, including hardship funds and grants.
Your local council may also be able to help with cash and grants if you are struggling with bills through the Household Support Scheme
The winter fuel payment scheme, where those getting the state pension can get between £100 and £300 to offset the cost of keeping their homes warm.
Low income households can get £25 a week to help with energy bills during the winter thanks to the cold weather payment scheme too.
The warm home discount scheme means you can a £140 payment that goes toward your heating costs – but you need to act quick as this scheme has already closed at most energy suppliers.
Chancellor Rishi Sunak announced a £150 council tax discount for millions of Brits in an attempt to ease the cost of living crisis.
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