Martin Lewis has warned households that they could end up paying more than £2,500 for energy - despite the new price “freeze” from the Government.
The new Prime Minister Liz Truss has confirmed the Ofgem price cap is being replaced by an Energy Price Guarantee.
It means instead of the price cap rising to £3,549 in October, the new Energy Price Guarantee will come into place instead - this is set at £2,500 for two years.
But this isn’t a total cap on your energy bills.
Martin explained how the Energy Price Guarantee - much like the Ofgem price cap - instead puts a cap on the unit rates you pay for gas and electricity, as well as the standing charge.
This means if you use more energy, you could end up paying more - use less, and you’ll pay less.
Speaking during his Martin Lewis Money Show Live on ITV this evening, he said: “This new guarantee is just a price cap but longer and by another name - and like all price caps, there is no total cap on what you can pay.
“That £2,500 limit you have heard is just an illustration of what the price cap would be for someone on typical use.
“There is nothing stopping you paying £3,000, £4,000, £5,000, £6,000 for energy.
“The cap and the guarantee rate is actually on the standing charge and unit rates.
“These are the average ones for direct debits, it does vary by region and it is higher if you’re on prepay by about 2% and even higher if you’re on payment in receipt of bills.”
He added: “If you use more gas and electricity, you will pay more. If you use less, you will pay less. There is no total cap on what you pay.”
The unit rate for electricity for someone paying direct debit is currently 28.3p and was due to rise to 51.89p in October. It will now be capped at 34.0p/kWh.
The unit rate for gas is 7.4p right now and was due to be 14.76p in October. This is now capped at 10.3p/kWh from October.
Unit rates for those paying by prepay will be roughly 2% higher, and 6% higher for those paying in receipt of bills.
Martin also explained that households will still get £400 off their energy bills this winter, as previously announced by the Government.
“This is automatically paid - £66 or £67 a month from October to March. You’ll get it each month,” he said.
“Most people will get it as a credit on their bill, but for some people it will be paid into their bank account.
“The difference is those who are on non-smart meters and prepayment meters, so a prepayment meter that isn’t a smart meter.
“You will get a monthly voucher sent to you by email or text or post. Really important - you do not have to claim this.
“You do not have to fill in details. There are a lot of scammers - I want to use a different word - using this to get your details.”
