Martin Lewis has issued some much needed clarity after the energy price cap fell, lowering household bills for people across the United Kingdom.
And it's not all good news, sadly, despite the initial announcement this morning (24 May).
Ofgem, which regulates the UK energy sector, lowered the price cap by seven per cent as of today. In real terms, it means the current £1,690 a year costs for a typical gas and electricity bill in England, Scotland and Wales will fall to £1,568.
A saving of £122 over the course of a year and roughly £500 less than the cap in July 2023.
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Amen to that after the recent cost of living crisis that lingers on.
On the back of some timely advice on not using your bank cards abroad, Lewis - who founded Money Saving Expert - has issued some advice on his X account (formerly Twitter) regarding the price cap that he describes as 'the good, the bad, and the ugly'.
"The good," he says, "[is] the energy price cap is to drop an average 7.2% for Direct Debit customers on 1 July.
"6.9% for prepay customers, 7.1% for those who pay in receipt of bills.
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"So roughly for each £100 you pay now, you'll pay £93 from July to September (the price cap changes every three months)."
But that's where the good news ends sadly, with Lewis offering some extra relevant advice on the bigger picture when it comes to managing your longer term household finances.
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The bad
Right then, 'the bad'. And it's all to do with how much you use. Lewis writes: "The standing charges will remain high, they are virtually unchanged.
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"All the cut is via the Unit Rates. So higher users will see a proportionately bigger cut than lower users."
A standing charge is a fixed amount you have to pay every day regardless of how much you use. So, for those who don't use much central heating as it is, and with summer around, expect your bills to not change by too much.
Lewis says that for Direct Debit payments from July, the rates will be as follows:
- Electricity unit rate 22.36p/kwH (down 9% from 24.5p)
- Electricity standing charge 60.12p/day (from 60.1p)
- Gas unit rate 5.48p/kwH (down 9% from 6.04p)
- Gas standing charge 31.41p (from 31.43p)
The ugly
It's time for 'the ugly', and the forecast is not great, Lewis says.
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"The Cornwall Insight has put out its new predictions and they don't make easy reading. If they're right this is the last fall, and the coming rises are big," he writes.
"On 1 July it has confirmed it drops 7%, so for every £100 paid today you pay £93.
"Then on 1 October it's predicted to rise 12%, so you'll go back up and be paying £104. Then on 1 January the crystal ball is saying it'll stay flat (at £104).
"All this makes the cheapest fixes which are currently 9% cheaper than now (so £91 per £100 on the price cap) look a decent bet."
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Martin Lewis' commitment on standing energy charges
Lewis has been campaigning energy standing charges, which on average charge £300 a year just to have energy meters in your home.
A follow up statement from him this morning said: "Lots of people saying 'please do something about lowering the energy standing charges' so let me reassure you. You will hear me push hard on it in every interview I've done today (and almost every time I talk energy bills) to keep the pressure on.
"I've raised it with Ofgem publicly, privately and through submission. Its a case of shifting some fixed costs from standing charge to unit rate. It is do-able. Its done a consultation that should 'report in summer.'"
On the price cap falling, Dhara Vyas, deputy chief of Energy UK, which represents suppliers, said: “Another fall in the price cap is good news for customers who were facing bills that were hundreds of pounds higher this time last year.
“However, as Ofgem underlined earlier this week, it’s only a return to relative normality.
"Energy bills are still larger than they were just over two years ago and prices will remain high and unstable for some time to come.
"Customer debt is at record levels and likely to increase still further, so despite suppliers’ ongoing efforts to support households, the next Government must work with the industry and Ofgem to put in place a long-term solution that provides targeted help for those who need it and ensures that bills are affordable for everyone.”
Topics: Martin Lewis, Money, Cost of Living, UK News
Tom Earnshaw