MoneySavingExpert Martin Lewis has explained what you must do now before the energy price cap rises by 54% at the end of this week. Ofgem is increasing its price cap this Friday (April 1)
Martin Lewis has explained three things you must do now before the energy price cap rises by 54% at the end of this week.
Ofgem is increasing its price cap this Friday (April 1).
For those on a default tariff who pay by direct debit, the price cap is going up by £693 from £1,277 to £1,971.
Prepayment customers will see a bigger jump, with their price cap going up by £708, from £1,309 to £2,017.
The price cap increase will be a huge hit to household bills, with many families left wondering how they can keep costs down.
If you’re worried about your energy bill, the MoneySavingExpert founder has explained the three things you need to know now.
Do a meter reading on March 31
Martin first explained that if you take a meter reading on March 31, you can tell your energy provider exactly how much gas and electricity you used before the price cap increase.
The idea is that you’re telling your energy provider that all your energy usage before April 1 should be charged at the current rate, so before the price cap increases on April 1.
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“You are drawing a line in the sand that says to them: all the energy I have used until this point should be charged at the cheap rate,” explained Martin.
“Do not estimate my usage, I am locking it down so you cannot charge me any more than the amount I’ve actually used from 1 April onwards.”
Cancelling your direct debit might cost you more
Many households are thinking about ditching their direct debits because they want more control over how much they’re paying, according to Martin.
But the MoneySavingExpert warned that this may end up costing you more. It’s all to do with how the price cap is calculated.
“If you’re on typical usage, the price cap from 1 April – for somebody paying by direct debit – is £1,971 a year,” he said.
“If you want to pay by quarterly bills, and that’s what most people ditching direct debit tell me they’re thinking of doing, then the price cap is £2,100.
“So that means you’re paying over 6% more for the same usage than you do by direct debit, because there is a discount allowed for direct debit.”
Most people should still ‘do nothing’
Sadly, energy bills are expected to keep rising.
Analysts at Cornwall Insight analysts predict the price cap will rise to around £2,500 a year for somebody on typical use from in six months time on October 1.
This marks an increase of around 25% – and if the price cap does rise to this level, then Martin explained you’d need a fixed deal that is no more than around 18% to 20% above the April price cap for it to be worth fixing right now.
Right now, the MSE founder says the cheapest open market deal at the moment is around 40% more than the April price cap – meaning for many homes, the best thing is to stay on the price cap.
How the energy bills crisis affects you
“It is not worth fixing. You’re better off to stay on the April price cap and then if nothing changes before that, go on to the new October price cap,” he said.
“Again, this is my best guess, I do not have certainty or surety here – it is a bit of crystal ball gazing.”
Of course, open market deals refer to fixes that are available to new customers.
In some rare cases, your current energy provider may off you something that is below the 18% to 20% threshold that Martin mentioned above.
This recently happened with E.on where it offered customers a fixed deal that was the same price as the price cap – but it sold out within hours.