Money saving guru Martin Lewis issued an important warning about the new energy guarantee in an emergency live show on Thursday night (September 22). Live on ITV, Lewis explained the new price guarantee intervention introduced by the government.
Earlier this month, Prime Minister Liz Truss announced that the Government would guarantee that the average household will pay no more than £2,500 in its energy bills, with the new energy price guarantee set to be in place for households from October 1. The money guru warned that the new price guarantee is on standard charges and unit rates, and that there is actually 'no cap' on how much households could end up paying.
And he warned that average households could still be paying almost twice as much as they were last winter. "From October 1, the huge shift coming to households has gone. The household bills will still be just under double what people were paying last December," he said.
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Martin Lewis told viewers that 85 per cent of homes in the UK are already on capped tariffs, which will automatically switch to the new guarantee. The previous price cap, which had updated every six months before being slashed to every three months, is to be replaced.
Lewis warned: "In reality, this new guarantee is just a price cap but for longer and by another name. Like all price caps, there is no total cap on what you can pay.
"The £2,500 limit is an illustration of what it would be for what a typical household would pay. The guaranteed rates and cap are actually on the standing charge and unit rates. If you use more gas and electricty you will still pay more - there is no total cap on what you will pay."
He went on to dispel misinformation about the new cap, which he said lead people to believe the most they would pay was £2,500 a year. The consumer saving will be based on usage, but on average usage, a household will save around £1,000 a year based on the previous price cap rates for October.
"The first thing capped is the standard charge, at 46.3p for electricity and 28.5p for gas, which still costs £270 a year just for the facility of having it. It is too high and I have lobbied against it.
"The unit rate for electricity is going to be 34p per kWh for electricity and to 10.3p for gas. This is still 27 per cent more expensive than the current cap, so for every £100 you pay now it will be £127 a month from October."
However, the money saving guru reminded homeowners of the £400 Energy Bills Support Scheme, which will be paid, in Great Britain, in six monthly instalments from October. "Lower users could end up finding their bills are actually around 19 to 20 per cent cheaper" he explained.
"People will know that I campaigned for there to be action this winter,. as I thought we were heading for a financial catastrophe. This system is expensive because it helps everyone, it isn't particularly targeted at those at lower ends, but most people will still breathe a sigh of relief."
The most vulnerable UK households will continue to receive £1,200 of support provided in instalments over the year, through discounts to Council Tax and Cost of Living payments for those in receipt of certain benefits. See all the latest on the new price guarantee here.
Read the latest Cost of Living stories from the Manchester Evening News here.
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