Martin Lewis has explained why your energy bills might be higher than the new April 1 price cap rate.
Ofgem is increasing its price cap this Friday (April 1) by an eye-watering 54%.
For those on a default tariff who pay by direct debit, the price cap is going up by £693 from £1,277 to £1,971.
Prepayment customers will see a bigger jump, with their price cap going up by £708, from £1,309 to £2,017.
But the energy price cap isn’t an absolute cap on bills, as its name suggests - instead, it sets a limit on the rates a supplier can charge for each unit of gas and electricity you use.
Martin explained how the Ofgem price cap works during a Cost of Living special on ITV ’s Good Morning Britain today.
“The £1,971 a year which is quoted as the new price cap from April 1 is just an estimate of what somebody on typical use would pay,” the MoneySavingExpert founder explained.
“There is no actual price cap. It’s actually a cap on the unit rates and standing charges you pay for energy, which means if you use more, you pay more.
“If you use less, you pay less. This varies by region and this is what the price cap is. It’s a cap for how much you can pay.”
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The price cap rate applies to anyone who is on a standard default energy tariff.
This will be households who are not on a fixed rate, including those who didn't lock into a fixed rate after their previous deal ended.
You'll also be on a default rate if your energy firm went bust and you were moved to another supplier.
Martin has also been advising households to take a meter reading on March 31 before the new price cap rates come in on April 1.
The idea is that you can then tell your energy provider exactly how much gas and electricity you used before the price cap increase.
"You are drawing a line in the sand that says to them: all the energy I have used until this point should be charged at the cheap rate," explained Martin in his latest MoneySavingExpert article.
"Do not estimate my usage, I am locking it down so you cannot charge me any more than the amount I've actually used from 1 April onwards."
Martin has also warned about cancelling direct debits, as this could end up pushing up your bills. It's all to do with how the price cap is calculated.
The price cap is £2,100 for those wanting to pay quarterly - so this means you're paying over 6% more for the same usage than you do by direct debit.
