Personal finance expert Martin Lewis has urged households with suppliers such as Octopus Energy, British Gas, E.ON Next, OVO Energy, EDF Energy and Scottish Power to check whether they are on a fixed rate and sign up quickly, following a significant rise in energy costs.
Prime Minister Andy Burnham described rising energy bills as “difficult” for people after Ofgem raised its price cap by 4% to a three-year high. Analysts forecast a further 9% hike from January. Ofgem said the price cap will rise by £60 per year – or £5 per month – to £1,723 for the average household using both electricity and gas if this level was sustained for a year.
Lewis warns of 'particularly bad news'
In a further blow for households, analysts Cornwall Insight released their latest forecast on Wednesday for a further 9% increase to the price cap in the New Year. This would put an average January bill up to £1,872 a year, £149 higher than October’s £1,723.
Appearing on Good Morning Britain this morning, Mr Lewis explained how the cap had changed in the last 12 months with a huge rise amounting to 17% – ‘particularly bad news’: “This is a 3.6% rise over the crucial start of winter period. This price cap lasts from the 1st of October until the end of the year. Now when we had the price cap that started in July and that was up 12.6%. The mitigation for that is it was over the low use summer period. But this is a 3.6% rise on top of the 12.6% rise.
“Meaning that when we go into October, prices will be 17% higher than they were in April. And that is over the winter period. So this is particularly bad news.”
What households should do now
On the issue of what people need to do now, he said fixing is an obvious choice – if not done already: “I think it’s important if we look forward first and then you’ll see that currently the prediction is the January price cap. Remember the price cap moves every 3 months. It used to be every six months. I campaigned against them making the moves every 3 months, but they’re still continuing to do it. So, on the 1st of January, the current prediction is we’re going to see rates rise again by 9% in the January period. This is because of what’s going on in the Middle East. This is all about wholesale rates in the Middle East.
“They do it. They look at wholesale rates over an average period. That last three-month period ended last week that they looked at for October. That’s why it’s going up and those rates are even higher today than they were a couple of weeks ago. They’re the highest they’ve been since the Ukraine crisis. So, the current look is January is going to get even worse. What can you do? Well, if you are on the price cap, if you’re on your company’s standard variable tariff, if you’ve not done anything, you can get a fix. Fix rates are not brilliant right now. The are about 7% cheaper than the current cap. So let’s say they’re 7% cheaper than the current cap, but that cap is going up 4% in October and is predicted to be going up 9% in January.”
VAT cut and government response
He said the government has tried to mitigate the change by cutting electricity VAT that also starts on the 1st of October and that lasts until March. He added: “It’s a six-month cut. Without that cut in VAT, we would have seen prices rising by about 6.6%. But the fact that electricity VAT has been cut does mean that this is a slightly more complex scenario than people would understand.
“First thing I need to say, remember the price cap only applies if you are on your firm’s standard tariff, the standard variable tariff. That’s the default tariff, the I haven’t fixed tariff, the I did nothing when my fix ended tariff, then this applies to you and you will in almost all cases see your prices rise. If you’re already on a fix, if you’re already locked into a special deal, this does not affect you. A fix is a fix. Your deal is a deal and you will stay on that price until that fix ends and then if you do nothing at that point you’ll be moved on to the standard variable rate so the price cap.
Rising energy bills are “difficult” for people, and the Government will continue to look for ways to get prices down in the long term, Andy Burnham has said. Speaking to reporters from a supermarket in London, the Prime Minister said: “It’s difficult for people and I recognise that.
“But it’s why, within days of taking office, I announced that we would remove VAT off electricity bills to give people that little bit of help. That kicks in from October.
“We know the price cap will have an impact, but it is what we can do right now. And we’ll continue to look as we go forward at how we get energy prices down in the long term, and that’s what we need to do too.”
