Millions of households across the UK will have their energy bills remain at £2,500 a year for at least three months from April 1. However Martin Lewis has warned that despite Jeremy Hunt's budget announcement, people will see a rise in their energy bills next month..
It comes after news the plans to increase the Energy Price Guarantee by 20 per cent have been postponed from April until July of this year, in the Chancellor's budget this morning.
It also closely follows a month-long campaign led by Martin Lewis, founder of MoneySavingExpert, which has been backed by 131 charities and consumer organisations for the postponement to go ahead. This includes National Energy Action, Which?, Citizens Advice, Alzheimer's Society and Energy UK, the trade body of the energy retailers.
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Thanking the Chancellor, the secretary of state for energy and the Government for listening to the "powerful campaign", Martin Lewis called it the "right move."
So when it comes to the money that leaves our bank accounts, how much are people in the UK set to pay - and what is happening? Here is what you need to know.
What is happening with the Energy Price Guarantee?
The financial guru said the price guarantee, which dictates what bills are for most people in England, Scotland and Wales, has been postponed until July adding that "in practice" this "means cancelled."
The price guarantee, which caps the typical household bill at £2,500, was supposed to rise to £3,000 next month however with calls to cancel the increase amid high energy costs, this will no longer happen and will remain as is.
Martin Lewis explained: "For a long time, it was the energy price cap set by the regulator, Ofgem, based on wholesale rates, the prices that energy firms pay for energy. That was going up and up and up and it was looking very worrying last summer.
"The intervention the Government chose to do was to introduce the Energy Price Guarantee, which is a subsidy on energy bills. So the difference between the Energy Price Guarantee level and the Energy Price Cap level is paid for by the state."
Using a typical bill, which the money man called a "relatively meaningless figure, but it helps me give you the scale of magnitude" he said that over the winter, for someone on typical bills, the Energy Price Cap would have been over £4,000, but the Energy Price Guarantee was £2,500. And the rule is simple. Whichever of these is lower is what we pay.
"Now, the Energy Price Cap has come down, and the one in April is around £3,200. The Energy Price Guarantee is still £2,500, but it was set to rise to £3,000. So this one was still in play. But because wholesale rates have come down, the current prediction is in July, the Energy Price Cap will drop to around just over £2,000, lower than the Energy Price Guarantee and we will pay the lower of the two."
This means the Energy Price Guarantee, which lasts until next April 2024, is no longer relevant from July.
What does that mean for your bills?
Martin Lewis has said that in April, bills will remain roughly flat explaining that "in practice, you will still pay more, just not as much more as you were paying. And especially for those with lower usage where that £66, £67 pounds was a disproportionate boost. Because if you're a lower user, it has a bigger effect. This is going to feel a big loss when you come to April. So you still have to be planning that you're going to need to get that money for that £66, £67 pounds a month increase."
From July, prices are expected to drop from the current rate with the prediction currently standing at 19 per cent. But this could change, people have been reminded.
Martin Lewis, founder of MoneySavingExpert said: "A month ago, I wrote to the Chancellor asking him to postpone the 20% rise in the Energy Price Guarantee. That letter was supported by 131 major charities including Which?, National Energy Action, Citizens Advice, Alzheimer’s Society and more – plus Energy UK, the energy industry trade body.
"I’d like to thank the Chancellor for listening. The rise – which would likely only have lasted three months – would have caused disproportionate harm financially and, with more 'price rise' letters, to people’s mental health."
He added: "Of course, this doesn’t mean bills will get cheaper. In April we see the end of the winter energy support – the £66/£67 a month everyone has received to lower their bills. So in practical terms people are still going to pay more than they have been, but at least some of the planned rise has been forestalled.
"Now we have to hope that the current predictions come true, that from July, the current wholesale prices will mean the price cap drops, and therefore bills fall by 19% – a welcome relief to millions."
What's happening to the energy rates?
Martin Lewis has warned the public that amid the fresh announcement, it is important that people understand it is currently unknown what the new Energy Price Guarantee is.
He explained that to the best of his ability, and with the information he has which "could be a little bit wrong", he thinks that we could see the following: "So let's do electricity first, I've only got the direct debit figures, I don't have them for other forms. But this will give you a rough idea of what's going to happen in electricity.
"I know it's a nightmare, and the standing charge is a nightmare, we're likely to see the standing charge rise, well, we know the standing charge will rise again, from 46.4p to 53p a day, you will pay more a day. But because that is rising, the unit rate you pay for electricity will be falling. So that will drop from 34.04p to around 33.2p. For gas, the standing charge is rising again by, not by as much, from 28.5p a day to 29.1p a day, which means we'll see a very slight decrease in the unit rate from 10.33p to around 10.3p.
"I mean for most people, it's roughly the same, there is a slight increase for lower users because the standing charge has gone up and a slight decrease for high users because the unit rate has gone down."
Speaking about fixed energy deals on a typical use, prices in July are expected to be around £2,500 and should then drop to £2,000 from July until the end of the year meaning billpayers are going to want to fix at no more than the current predictions of around £2,150 a year for somebody on typical use.
He added: "And even then you probably won't save if the predictions are right. But that would at least give you some price certainty that things could not go up."
You can find out more detail through the MSE website.
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