Martin Lewis has warned households amid the ongoing cost of living crisis that the Government’s new plan to help with energy bills could still see them paying upwards of the £2,500 ‘freeze’.
The warning comes after Liz Truss announced that the Ofgem price cap is being replaced by an Energy Price Guarantee. While the price cap was set to rise to £3,549 in October, the new Guarantee confirmed by the Prime Minister will cap the average energy bill at £2,500 a year for the next two years.
But the MoneySavingExpert founder explained that this figure does not mean that households will see their bills stay below £2,500. Speaking during his ITV Money Show Live on Thursday, Martin explained that the Guarantee puts a cap on the unit rates you pay for gas and electricity as well as the standing charge, The Mirror reports .
READ MORE: Electricity meter warning issued ahead of energy price cap rise in October
“That £2,500 limit you have heard is just an illustration of what the price cap would be for someone on typical use,” the financial expert said. “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,” he went on. “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.”
The unit rate for electricity for someone paying direct debit is currently 28.3p, while the unit rate for gas is 7.4p. These amounts will still rise in October, but will now be capped at 34.0p/kWh and 10.3p/kWh respectively.
Before the Energy Price Guarantee was introduced, electricity was due to increase to 51.89p next month while the unit rate for gas was set to be 14.76p. Unit rates for those paying by prepay will be roughly 2% higher from October, and 6% higher for those paying in receipt of bills.
Martin 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.”
He also reminded viewers that households will still receive the £400 discount on their energy bills this winter announced by the Government in July. This will be paid automatically in monthly instalments from October to March.
The Government’s announcement of the Guarantee reads: “From October 1, a new Energy Price Guarantee will mean a typical UK household will now pay up to an average £2,500 a year on their energy bill for the next two years. This is automatic and applies to all households.
“This will save the average household at least £1,000 a year based on current energy prices from October and is in addition to the £400 energy bills discount for all households. This applies to all households in Great Britain, with the same level of support made available to households in Northern Ireland.”
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