Martin Lewis urged people to understand what is coming (Image: ITV)
People could be about to see major changes to their household bills, leaving them better off once a major reduction takes place. Martin Lewis has urged people that “now could be the best time” to make a major decision on energy bills.
It comes as Ofgem, the UK’s energy regulator, announced that the April price cap will be cut by 6.7% from April 1 for three months. But, Martin Lewis claimed “that’s only half the story” and suggested that people need to understand what this means for them as it could result in huge savings.
In an Instagram video, he said: “All tariffs, even if you are already on a fix, will see the rate dropping in April. People on an existing fix, that price is going to come down too.”
Martin claimed that 60% of UK homes are on the “bog standard” offering – the standard variable tariff. This is dictated by fluctuating prices for gas and electricity based on wholesale costs and the Ofgem Energy Price Cap.
People will most likely be on this rate if they did nothing after their last offer with the utility company ended. Martin warned that anyone paying this “should get off it” by switching to a better deal, and now could be a perfect opportunity to minimise the amount that is spent on energy bills.
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Martin explained how gas and electricity rates will change in the coming weeks, which should mean most UK households see their bills go down. He explained:
- Electricity unit rate – coming down by about 10.9% per kilowatt hour
- Electricity standing charge – going up by 4.5% per day
- Gas unit rate – going down by 3.2%
- Gas standing charge – going down by 17%
Martin said: “Overall, the biggest winners here are those who are high-using, electricity-only customers. But everyone should see a reduction in general, apart from the very lowest users, and even then, it will be trivial once you add up gas and electricity together.”
What is the Energy Price Cap?
The Energy Price Cap is set by Ofgem (short for the Office of Gas and Electricity Markets). It limits the maximum amount suppliers can charge for each unit of gas and electricity (kWh) and sets the maximum daily standing charge for default (standard variable) tariffs.
What it dictates will impact homes in England, Scotland and Wales. In Northern Ireland, the Utility Regulator regulates energy suppliers and sets the equivalent of the price cap.
The cap does not set a maximum total bill, but rather a maximum rate, meaning users pay more if they consume more energy. It was introduced in 2019 to protect consumers from high prices.
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Martin added: “This time around, [people] need to understand that the main reason the Price Cap is dropping is the same as the reason we’re going to see other tariffs dropping on April 1. That is because there have been underlying changes to the policy costs of energy.
“Currently, there is an ECO scheme that ends in March, so that is coming off bills, and there is a renewable obligation that [we] pay for on bills, and 75% of that is being shifted from energy bills to the state, so general taxation or debt.
“Those policy amounts are coming off the bill, and because of that, that’s what is driving the Price Cap down. It also means that all other tariffs are coming down too. If you are on a fix, whether you fix today or on an existing fix, expect to see your rate drop by seven to nine per cent [from April 1].”
MoneySavingExpert claimed that now is “a pretty good time to fix” if utility bills need to be renewed. He directed people to his Cheap Energy Club page on the Martin Lewis website to run a comparison to find the best deal, depending on how much energy your house uses.
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