MARTIN Lewis has explained what the energy price cap increase means for you.
Households across the country will see their bills rise by £500 a year in April even though the energy price cap is set to drop.
Martin Lewis has explained what the energy price cap means for youKen McKay/ITV/Shutterstock
It was announced today that Ofgem’s energy price cap will fall to £3,280 from £4,279 due to a drop in wholesale prices have.
The energy price cap limits the amount typical households pay for dual fuel bills.
Last year, the government stepped in to stop bills rocketing to over £4,000 under the price cap.
It introduced the Energy Price Guarantee (EPG) to limit the average bill to £2,500 – although the more you use the more you pay.
The EPG is set to go up by £500 in April, increasing the average household’s annual bill to £3,000.
Martin Lewis is among the experts now calling on the government to reduce the EPG, to reflect the falling wholesale prices.
The consumer expert warned: “You’re going to pay 20% more.”
Speaking on ITV’s Good Morning Britain, ahead of the announcement, he explained what the news today means for Brits.
He said: “The energy price cap doesn’t replace the price that energy retailers can charge consumers, it dictates the price energy retailers can charge – and I’ll explain why that’s different.”
The MoneySavingExpert founder explained that the current price cap for January until March 31 is £4,300 a year for somebody on typical use – although he said “that’s a meaningless figure but it’s much easier to explain using it”.
He continued: “We’re expecting it to go down to around £3,300 for somebody on typical use.
“But, since last October we’ve also had this thing called the Energy Price Guarantee, which is where the government subsidises energy prices.
“So, if you take the £4,200 figure – what we’re paying is £2,500 and the difference is the amount that the government pays the energy companies.
“Now, the price cap is due to come down to £3,200 but as it is still higher than the Energy Price Guarantee, we will still pay the Energy Price Guarantee.”
He continued to say that from April 1 the government, which sets the EPG, is upping it from £2,500 to £3,000 for someone on typical use.
That’s an increase of 20% for everyone.
But, the cap will still be higher than the EPG, making it irrelevant.
Martin also went on to explain why he is calling for the increase of the EPG in April to be postponed.
He explained: “The prediction is that from July the price cap will drop to £2,100, it will then be lower than the Energy Price Guarantee so we will pay the lower amount.
“So, the government from July will stop subsidising energy prices and we will pay the lower.”
He wrote to the Chancellor two weeks ago asking for a delay to the rise.
Martin wrote: “Please do not do the price increase in April it will only likely be in affect for three months, it seems to be an act of national mental health harm to send millions, almost everybody, a letter saying your energy bills are going to go up by 20% again, well they’ve already more than doubled again, and just for the sake of three months.
“If you instead postpone that rise until July, well then we’ll be back on the price cap so the Energy Price Guarantee will be irrelevant and we get people to escape having to have that price hike.”
Eighty major charities have now supported his call.
What is the energy price cap?
The price cap on energy bills was introduced in January 2019 as a way to ensure that households are not ripped off by their energy suppliers.
Ofgem set the price cap every three months and it’s based on the wholesale price of gas.
The price cap was hiked to £3,549 a year in October – but the government stepped in.
To stop bills from spiralling, the former PM, Liz Truss, replaced the cap with the Energy Price Guarantee, which rolled out from October 1.
It has frozen bills at £2,500 a year on average since then.
It was supposed to be in place for two years, but after the fallout from the mini-Budget and concerns over rising government debt, Chancellor Jeremy Hunt said the guarantee would only last until April.
After that the EPG will rise to £3,000.
It’s worth bearing in mind that the EPG is an average bill a household might pay for both gas and electric.
You could pay more if you use more energy – or less than this if you use less energy.
Over 22million households are on default or standard tariffs that are price capped.
What help can I get if I’m struggling?
Millions of households started receiving a £400 energy bill discount from October 1.
Households will have already received a £66 and £67 payments every month.
There will also be a payment worth £67 in March.
Between November 2022 and March 2023, a £300 one-off “Pensioner Cost of Living Payment” is being paid out to eight million households.
It is being given to those who already get the winter fuel payment – which is worth between £100 and £300 for those over state pension age.
Millions of households have also started to get the £150 Warm Home Discount between December 2022 and March 2023.
Meanwhile, the government is pumping a further £842million into the HSF after March 31 which councils are giving out.
It means that further support will be available to families under the scheme again until 2024.
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