Thousands of people across Wales are feeling the pinch after the energy price cap rose sharply to £1,971 in April. However, worse is still to come in October when it is expected to rise by an extra 51%, bring the price cap to around £3,000 a year.
To help followers prepare for a "bleak" winter and beyond, financial expert Martin Lewis has compiled his top tips in this week's Money Saving Expert newsletter. He explained how currently, households are yet to feel the "huge accelerating impact" of the war in Ukraine, which will hit hard from October.
He wrote: "I had so many questions after briefly mentioning this last week, I wanted to try and answer the biggies." Here are Martin Lewis' essential tips and advice to help you cope with the inevitable rise.
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1) The price rise is coming no matter what
The energy price cap limits what firms can charge in England, Scotland and Wales for their default standard variable tariffs, Martin said. Currently it changes every six months, but that will soon reduce to every three months. The vast majority of homes are on the price cap, for example if you've never switched tariff, if your cheap fix ended and you did nothing, or if your firm went bust last year and you were moved elsewhere.
The new prediction is that the energy price cap will rise by around 51% in October (to £2,980/year on typical use). Martin wrote: "The price cap is misnamed though. There's no maximum amount you'll pay. What's actually capped are electricity and gas standing charges and unit rates."
2) No tariffs are 'meaningfully cheaper' than the current cap
"Before the energy world changed last October, I always said the price cap rate was pants," Martin said. "So switch to something cheaper. Today, there are no tariffs meaningfully cheaper than the current price cap. So none of this is about switching somewhere cheaper than now." You can get more money news and other story updates by subscribing to our newsletters here.
3) However, there are fixes cheaper than the predicted October cap
Martin said there are likely to be some fixes out that that will work out cheaper than the predicted price cap in October. If the predictions are right, on average you'll pay 41% more over the next year than you do now, Martin explained. That's taking into consideration the last three months on the current rate, three months from October and an adjustment for higher usage over the cold winter months.
Based on this, Martin said his rule of thumb is: "If you're offered a year's fix at no more than 40% above your current price-capped tariff, or 45% more if you very strongly value budgeting certainty, it's worth considering." However, he stressed that this is not an exact science and based on predictions and averages alone. He added: "I can't promise I've got this right, there are too many unknowns."
4) Fixes worth considering are often 'existing customer only'
Open market fixes (ones anyone can switch to) that are worth considering are not common to come across, Martin wrote. Usually the top deals are offered to existing customers only. If you're interested in following this route, you should contact your provider. Martin warned you should double check it is the same tariff as many have similar names.
5) There's nothing wrong with sticking on the price cap
The cheapest fixes might help some households save some money. However, unless you're with one of the companies offering the cheapest existing customer fixes, Martin said, it's not a must to fix.
Martin wrote: "If you want price certainty, the cheapest fixes now give you that, but you'll pay more in the short term. If in doubt though, there's nowt wrong with playing safe and sticking on the price cap."
6) What should I do as a Bulb customer?
Martin said he has had many questions relating to Bulb. Currently the firm is in special administration as it was "too big" to be moved to another firm, he wrote.
This means it is very unlikely existing customers will be offered tariffs, they will just stick on the price cap. It means customers have fewer options, although Bulb customers are free to leave and look elsewhere.
Customers should consider whether to go for the "cheapest open-market fix" which takes customers from any firm. These tariffs are not usually as cheap as the existing customer fixes, Martin wrote, however some times they are a good price and worth considering. The issue is they change constantly, so other days it may not save you money by going with this option.
7) What to do if your fix is ending soon
Martin said it is likely that your current fix is far cheaper than anything else you'll find on offer. When it ends you will be moved to the price cap through default. The logic on whether to fix or not is the same as outlined above.
However, there is a difference, Martin said: "The only difference is timing. The further away your fix is from ending, the less time you'd have on the current cheaper price cap rate."
8) Help is available for those really struggling
The UK Government announced a new energy bill support package worth at least £400 to almost all households and over £1,000 to some. This will apply regardless of whether you are on a price-capped tariff or if you fix. However, there are still many people who will find the cost of living crisis extremely difficult. We've put together a list of all the financial support you can get in Wales if you're struggling to pay the bills .
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