Martin Lewis has warned that energy bills could rise by 50% in April but has given his advice on what consumers should do to keep prices as low as possible.
The consumer expert told his ITV Money Show on Thursday (6 January) that “unaffordable” price hikes were coming because there will be a review of the energy price cap in the spring.
What is the energy price cap?
Energy regulator Ofgem sets a cap on the amount firms can charge consumers for their gas and electricity.
The current cap is £1,277 a year for customers on default tariffs and £1,309 for those on pre-payment deals.
However, this could rise by hundreds of pounds when the cap is reviewed in April for England, Wales and Scotland - Northern Ireland has a different system.
How much will bills rise by after the energy price cap review?
Lewis warned that the price cap “will rise 50 percent, adding an unaffordable £600 to the total bill."
Other energy experts agree that prices will rise by around that percentage.
Cornwall Insights suggested bills could rise by 46% while Emma Pinchbeck, Energy UK chief executive, said: “Domestic energy prices are going to go up 45% to 50% in the spring".
A rise of 50% would see the cap hit around £1,916.
What is Martin Lewis’s advice on energy bills?
Lewis said the best thing consumers can do if their energy deal is coming up for renewal is to do nothing.
This means that customers would end up on an offer limited by the price cap.
The cheapest energy deals previously have often been fixed rate deals and not variable rate - which consumers end up on by default once their contract expires.
However, due to the rising energy prices most people are better off on a provider’s variable rate deal which is limited by the cap.
Lewis said: "The vast majority of people should still be doing nothing and sticking to the price cap.
"Currently the energy price cap forces energy suppliers to sell gas and electricity below the cost price.
“There are no meaningfully cheaper deals."
Lewis added that some energy companies might offer existing customers cheap fixed rate deals.
However, he said the only time to take a fixed rate deal is if the cost of it is 40% of the current £1,277 price cap.
"If your company offers a fix you have to calculate how much above the price cap it is," he said.
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