Martin Lewis energy bills tips: money saving expert’s advice on how to deal with energy price cap increase

Energy regulator Ofgem has given itself new powers to potentially raise the energy price cap again before October in a bid to protect suppliers and consumers

The UK is in the grip of one of the worst cost of living squeezes for decades.

Energy bills have already been going up and are set to soar even further from April thanks to the raising of the energy price cap.

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This energy crisis has come at the same time as - and partly contributed to - the biggest rise in inflation since the 1990s, which has driven up the price of goods and services, including the cost of an average UK food shopping basket.

Given these pressures are very much with us and appear to be likely to worsen in the coming months, you might well be wondering whether you should take any action to cushion the prospective blow to your finances.

On Thursday (3 February), money saving expert Martin Lewis gave some advice on his ITV show about what you should do.

So what exactly did he recommend?

Energy prices are set to soar further from April after Ofgem announced a new price cap (image: PA)

Here’s everything you need to know.

How much are energy bills set to rise by?

The new Ofgem energy price cap means households on default tariffs will see their bills go up by 54% - or £693 a year, on average - to £1,971 from 1 April.

Customers with prepayment tariffs will be the worst hit, with annual costs set to increase by £708 for an average home.

The price cap has had to be raised because wholesale gas prices have risen sharply, which led to dozens of energy suppliers going bust under the previous cap.

The impact of these price rises has been compounded by a partially linked increase in inflation.

On Thursday (3 February), the Chancellor Rishi Sunak announced a package of support, including council tax rebates for poor-to-middle income households, as well as a £200 loan for consumer energy bills.

Ofgem could raise the price cap again before October thanks to new powers it has given itself (image: PA)

Martin Lewis energy tips

Martin Lewis shared his latest energy deal tips on his ITV show on Thursday.

He made two recommendations:

  1. Do not change your deal

In more usual times, you would shop around for the cheapest energy deal.

However, because wholesale prices are so high, there are no suppliers out there who are offering a fixed rate deal that beats the cap, Martin Lewis said.

So his advice was to sit tight and “do nothing”.

  1. Prepare for another price cap rise

Mr Lewis said the price cap could rise again in October.

Experts are predicting wholesale prices could go up by as much as 20%, pushing the price gap above the £2,300.

What Martin Lewis said

“I’ve done the numbers - I’ve had to make a lot of assumptions, I don’t have a crystal ball,” he said.

“If we assume that in October, the price cap stays where it is in April, you would have to find a fix that is less than 44% more expensive than where we are right now for it to be worth fixing.

“If we think it’s going to go up in October by 20%, you’d need to find a fix that is now more than 59% more than the price cap today.

“The cheapest fix right now is 68% more than the current price cap - way more than the 1 April price cap, even more than my high end scenario in October.

“Of course, anything could happen - but there ain’t no market fix that you should be going for right now.

“Maybe some existing customers in certain circumstances with high or low use might find one but the message for most people: do nothing. Stick on the price cap. Don’t fix.”

Ofgem gains energy price cap powers

The news comes as Ofgem gave itself new powers to change the price cap more than twice a year in a bid to reduce the risk for suppliers and, in turn, help households.

At the moment, the energy regulator can set a summer price cap and a winter price cap.

But with its new powers, it could raise the cap again - or lower it, if markets allow - before the next price cap change in October.

Before it makes any emergency changes, the watchdog will have to consider whether the situation meets five criteria.

The change in energy prices, or another event affecting suppliers, must:

  • Be “rare”
  • Be outside suppliers’ control 
  • Be difficult or impossible to avoid 
  • Affect the costs of supplying energy 
  • Require urgent action

The Government, meanwhile, has not ruled out introducing further support measures for the October energy price cap.

Speaking on BBC Radio 4’s Today programme, Energy Minister Greg Hands said the situation was “under constant review” and that “we won’t hesitate to act” if prices looked set to rise again.

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