MARTIN Lewis has given his verdict on the new energy price cap – and explained what it means for you.
Households across the country will see their bills drop by £426 a year on average from July, after Ofgem dropped its price cap.
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It was announced today that the energy price cap will fall to £2,074 from £3,280, due to tumbling wholesale prices.
The energy price cap limits the amount typical households pay for fuel bills – although the more you use, the more you pay.
Last year, the government stepped in to stop bills rocketing to over £4,000 under the price cap.
It introduced the Energy Price Guarantee to limit the average bill to £2,500 but this will end on July 1.
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.
But Martin Lewis has warned that people may still pay as much for energy now as they did in the winter.
This is because the drop in rates doesn’t make up for the gap left by the end of the government’s £400 energy bill support scheme.
In a statement on Twitter, the MoneySavingExpert founder said: “Apart from for 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.
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“Overall, this still leaves people paying double or more what they did before the energy crisis hit in October 2021.”
The cap does not set the maximum a household will pay for their energy but limits the amount providers can charge them per unit of gas or electricity, so those who use more energy will pay more.
The standing charge – roughly £300 paid each year by households just to access gas and electricity – has not been included in the cap and will not fall.
Martin said: “This perversely means the less you use, the less you save.”
This is because saving energy can only reduce your bills up to a point and has no impact on the standing charge.
Ofgem is launching a consultation on operating costs, which could see standing charges change in the future.
What is the standing charge?
Ofgem sets a maximum daily standing charge within its overall price cap.
The standing charge is what households have to pay in order to keep their home connected to the National Grid.
The total price cap also includes a limit on the maximum amount suppliers can charge for each unit of gas and electricity.
How much is the new energy price cap?
The new price cap is £2,074 per year typically for an average household paying via direct debit.
This will come into effect on July 1.
Martin Lewis says for every £100 you pay on energy now, you’ll likely be paying between £80 and £85 on energy from July.
This applies to households on a standard default tariff.
Chancellor Jeremy Hunt confirmed in the Spring Budget that energy costs for prepayment households would be brought in line with those who pay by direct debit from July 1.
Prepayment meters are disproportionately used by vulnerable and low-income customers. but they typically pay £45 extra a year for energy.
However, those who pay via cash, cheque or bank transfer, usually every three months, will pay significantly more.
Some experts are predicting that the billpayers may see more competitive fixed-rate energy tariffs as prices begin to stabilise.
This means it could soon be worthwhile for households to consider switching again.
Unlike variable tariffs, they are unaffected by the cap.
Can I get help with my energy bills?
Yes, energy suppliers do offer support for those who are struggling to pay their bills.
Those on Universal Credit and older legacy benefits are also entitled to cost of living payments worth up to £1,350.
There are plenty of energy grants and schemes open to help you out if you’re struggling.
Ask your supplier what’s on offer and how to apply, or check here:
There’s a one-off fuel voucher from your energy supplier if you’re on a prepayment meter.
Councils are also dishing out hundreds of pounds to hard-up families through the Household Support Fund.
If you’re in debt there are plenty of services you can take advantage of and they offer free and friendly advice on how to manage debt.
Most of them can offer you free guidance and help in person, over the telephone or online.
They can also help you take the next steps if you need a debt management plan (DMP) to tackle your debt or an Individual Voluntary Arrangement (IVA).
These are agreements for managing multiple debts.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
