Martin Lewis has shared a new video to help more people understand how Ofgem’s new energy price cap will impact their bills from July 1. On Thursday, the energy regulator announced the price cap will drop by 17 per cent from £2,500 to £2,074 a year, which means households with typical, average usage on a standard tariff will see an annual saving of £426.
Martin explained in real-terms that means for every £100 households currently pay on gas and electricity, it will cost £83 from July. However, he also shared the “bad news” that the high daily standing charges will not go down, which means even if you cut your energy usage to the minimum over the summer months, it will still cost around £300 a year - just to be connected to your supplier.
The founder of MoneySavngExpert.com said: “Now the bad news is the high daily standing charge that you pay will remain unchanged after the 1st of July. It will continue to be an average of 53p a day for electricity, 29p a day for gas.”
He continued: “So in other words, you will pay £300 a year just for having the facility of having gas and electricity. For me, that's a moral hazard.”
Martin went on to explain that means “lower users cannot save much by cutting their usage” adding that this is something he has been lobbying Ofgem on and said that a new consultation issued on May 25 “may see that change a little bit in future”.
For anyone confused on how the bills will actually come down if the standard charges remain unchanged, Martin explained: “What's actually happening to cut the price is the unit rates that you pay are being decreased – an average of 3p per kilowatt hour, meaning electricity will go to 30.1p per kilowatt hour, gas to 7.5p per kilowatt hour.”
The financial guru also said Direct Debits are not expected to go down quickly and advised people soon after the announcement yesterday to make sure they do a meter reading around July 1 to ensure usage and bills are not estimates.
In the video, Martin said: “If you're on a direct debit, do not expect it to alter quickly. Most energy firms only change their direct debit assessment a few times a year.
“It might not even alter by the 1st of July, it depends on when they reassess. If you think you are paying substantially too much, you can get in touch with them and say that, and it's worth doing it.”
He added the 'Is My Direct Debit Fair?' calculator on MoneySavingExpert.com is being updated so that people can check what the right amount should be - you can read more on this here
You can watch the full video on MoneySavingExpert.com here.
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