Martin Lewis: What the Energy Price Cap change means for you

Hi, I'm Martin Lewis from moneySavingexpert.com. This morning,

energy

regulator Gem announced that its new

price

cap will come into force on July 1 and this is vitally important for virtually everyone's bills because it dictates the maximum rates that

energy

companies can charge people with their standard rates in England, Scotland and Wales, and almost all households are on a standard rate, almost all that are not are on a fixed rate, so for most people this directly

change

s their bill. The good news is that the rate is low. an average of 17, in other words, for every £100 you currently pay for gas and electricity, from July it will cost you £83.

Now the regulator itself uses this typical usage figure, saying it's dropping from £2,500 to £2,074, frankly that doesn't make sense because no one talks about typical usage, which is why I prefer to talk about it in terms of percentage drop, but in terms The real practical ones are the maximum rates you can pay, the ones that

change

, I say maximum, everyone charges the maximum, they could be cheaper, they don't. or they aren't at the moment anyway, now the bad news is that the high daily charge you pay will remain unchanged after the first of July, it will still be an average of 53p per day for electricity and 29p per day for gas, so in In other words, you will pay £300 a year just to be able to have gas and electricity for me, that is a moral hazard, it

means

that users with fewer resources cannot save much by reducing their use , it's something that I've put pressure on the regulator to not make changes yet, but there's no It's a consultation that they published today and you may see that change a little bit in the future.

What is really happening to reduce the

price

is that the unit rates you pay are being reduced by an average of 3 pence per kilowatt hour, which

means

that electricity will increase to P30.1 per kilowatt hour of gas at 7, P5 per kilowatt hour. Now the rates I'm talking about are average direct debit rates. Now I say average because it's regionalized and direct debit because different payment methods have different fees, so consider it a rough estimate. For example, it won't be exact for you everywhere is slightly different. I want to talk about prepaid meters for a moment before continuing.

Prepaid will likely see a slightly larger drop than 17 percent. This is because, for the first time, on July 1, prepaid meter rates will be matched with direct debit rates, some by changing the price cap, others through a small government subsidy. Now we know that the direct debit is decreasing by 17 and we know that the prepayment was slightly higher, so I think it will come down to be the same. I assume it will be a drop of 19, in other words, for every 100 pounds you reload now you will only need to reload 81 pounds after July 1st. I assume because the exact figures for the advance payment have not been published. yet and probably won't be for a couple of days direct debit direct debit if you have a direct debit don't expect it to change quickly most energy companies only change their direct debit assessment a few times a year you may don't even change it by the first of July depends on when they will re-evaluate, if you think you are paying too much you can contact them and tell them it is worth doing it, if it is too much you will find that we are just building and updating the numbers right now on the money saving expert and it's my direct debit fee calculator so you can see

what

the right amount will be, but it's especially worth talking to them if you have a lot of credit.

This is the time of year you should have the minimum amount of credit, so if you have reduced credit now and rates are going down you may want to talk to them, make sure you have read the meter first so you know if you can recover part of that credit. The following quick tip is for very people. Specify this on non-smart electricity prepaid meters because the rate you pay is dictated by the last time you recharge, so if you recharge in June you will still pay the high rate and will pay it until you recharge. again, so

what

I suggest what you do is try to run down your electricity meter in June so you don't top up more than necessary and then do the full top up on July 1st to make sure you're paying the new rates that don't work for all meters in that category, but they do work for many of them.

The next question people ask me are fixes that will start to be on the market. Yes, we already know there are a couple available for existing customers. right now they're not offered to many people, uh, they're only for very limited numbers, but I think we'll certainly start to see more solutions being offered to existing customers; in other words, your energy company will say they can arrange with us and maybe some Open Market offers, but be very careful if you look at the price now because if they give you a comparison with current prices, let's say it's 10 cheaper, They will say that it is a saving, but we know that energy prices, standard rates are going down. 17 on July 1st so actually a savings of 10 now would mean you'll pay more, what I'd like to say is a fix around the July price or maybe just a little more if you could get one at that price to be setting the price to arrive in July or a little later, then looking at the current predictions from Cornwall Insight which say energy bills will go down a little again in October and rise a little again in January, so if you are risk averse and want Know exactly what you pay, then fixing the July price would be a good deal, even a little over, but fixing it substantially above, even if it's cheaper than what you pay now, probably wouldn't be worth it, of course.

I'll be working on that a lot more when those fixes start going live and we'll evaluate the wrecks individually, that's just to give you an idea. Final thought. One of the big changes in July is that, for the first time since last October, the state was no longer subsidizing energy bills. Last October, they brought back the energy price guarantee that said if the price cut goes too high, You will only pay the energy price guarantee and the state will pay the difference and that subsidy has been in effect since last October starting in July. the maximum price is lower than the guaranteed price of energy, so we pay the lower amount.

There is no more state subsidy for me now that we know that this winter people are likely to continue paying more than last winter because they are not receiving the £66 a month energy support that was available last winter and the reduced rates do not compensate for that, meaning that as the government is spending tens of billions of pounds less than it expected, there is some scope for it to do something specific. help and I would say the real problem is that people who are just above receiving benefits, those who are receiving benefits receive cost of living payments, but those who are just above the benefit level, even a pound above does not They receive no help at all and the typical bills of two thousand dollars a year are a tremendous payment, especially without the support of £66, so if I were in charge I would implement specific support to make that happen, but I am not in charge .

I'll have to wait and see if the government does anything, I hope. This clarifies a little what is happening to you.