Money Saving Expert founder Martin Lewis shared a warning today after Ofgem announced its new price cap for April.
Even though the Ofgem price cap will fall in April, energy prices will rise by around 20 per cent.
This is because, even though analysts have predicted the price cap will drop from £4,279 a year to £3,294, people will feel an increase as the government scales back its support. Mr Lewis added that these figures relate to “people on typical [energy] use”.
The money expert is campaigning against the government’s plans for an energy rise in April and wrote to the Chancellor two weeks ago about it.
The government introduced its Energy Price Guarantee at the end of last year, and it’s currently set at £2,500. But, in April, it will rise to £3,000.
The Energy Price Guarantee refers to the government’s subsidising of energy prices.
In his tweet, Mr Lewis said: “The Apr-Jul @ofgem energy price cap is 23% lower (dropping from £4,279 to £3,280 for someone on the meaningless ‘typical’ bills).
“As it’s still above govt subsidised Energy Price Guarantee (currently £2,500 rising 20% to £3k in Apr) it doesn’t change what we pay mainly.
“Tho 1. Price cap does set balance between DD, prepay, eco 7 & pay by receipt of bills costs, so we’ll monitor that granular detail when it’s out. 2. I’m campaigning against the 20% Energy Price Guarantee rise, and reading the runes, think there’s a good chance of succeeding.”
Speaking on Good Morning Britain this morning, Mr Lewis explained: “The energy price cap doesn’t dictate what energy retailers can charge consumers, it dictates the price energy retailers can charge.”
Mr Lewis explained that you have the price cap, which is currently at £4,279 and then you have what consumers are paying - the Energy Price Guarantee - currently at £2,500. The difference between these figures is what the government subsidises and pays to energy companies.
The price cap is due to come down to £3, 294 in April but because this figure is still higher than the Energy Price Guarantee of £2,500, customers will still pay the latter figure.
On 1 April the government, because it sets the Energy Price Guarantee, is planning to increase this price from £2,500 a year for someone on typical in England, Scotland and Wales use by 20 per cent to £3,000.
“Because the cap is still higher than the Energy Price Guarantee, the cap is irrelevant,” Mr Lewis added.
The financial expert continued to say from July, the price cap is expected to drop to £2,100 and be lower than the Energy Price Guarantee, so customers will then pay the lower amount.
The government will then stop subsidising energy prices from July.
“This is why I wrote to the Chancellor two weeks ago saying please do not do the price increase in April,” Mr Lewis told the news show.
“It will only likely be in effect for three months. It seems to be an act of national mental health harm to send millions - almost everybody - a letter to say your energy bills are going to go up by 20 per cent again when they’ve already more than doubled just for the sake of three months.”
Mr Lewis hopes for the increase to be postponed until July we’ll be back on the price cap and the Energy Price Guarantee will be irrelevant.
80 major charities and Energy UK have all supported Mr Lewis’ urgent call to the government.
