Money saving expert Martin Lewis warns of predicted 51% energy price cap rise, and shares how it’ll effect households around Britain.
Martin said: “In April, the energy price cap, which the majority of homes are on will rise over 50 percent adding an unaffordable £600 to a typical bill if the Government doesn’t intervene.”
What is the energy price cap?
Essentially, the energy price cap limits the rates a supplier can charge for their default tariffs. These include the standing charge and price for each kWh of electricity and gas (the units your bill is calculated from). Of course, there’s no max you pay for energy, and everyone’s bills are different, so think of it as as a cap on the cost of each unit of gas and electricity.
Currently wholesale gas prices are “astronomical”, Martin says, and retail prices are also expected to skyrocket with the next revaluation. You can see a live and updated graph of wholesale gas prices here: https://www.energybrokers.co.uk/electricity/historical-electricity-and-gas-graph?utm_source=51+Percent+Gas+Bills&utm_medium=Article&utm_campaign=TR17_01_22
He said predictions range from a 46 per cent to 56 per cent rise, with analysts Cornwall Insight forecasting the cap will rise by 51 per cent – £1,925 per year. Despite energy consumption April being lower, those on direct debit will likely feel the hit immediately, as payments will be adjusted based on annual usage.
What can bill payers do?
Should you be switching suppliers, or should you sit tight?
Martin is seemingly advising most homeowners to do nothing, and if possible, stay on the cheapest price, which is currently the energy price cap. Switching would take too long and the market being uncertain is definitely a risk.
He stated: “Sticking on the price cap has saved people large so far, but as we get nearer to 1 April, less time and therefore benefit remains of the current low rate. Switch now, and as moving firm takes an average 17 days, you’d lose just over two (high use) months’ cheap rate.”
“It looks like most people should do nothing (no certainty, I don’t have a crystal ball), it looks like only a few edge cases should be looking at fixing right now. So, if in doubt, just stick with today’s cheapest price – which is the cap.”
However, he does give out an alternative that could help out a few.
Due to his prediction of the energy price cap rising over 51%, he says: “If you can find a fixed-rate energy deal that is no more than 40 per cent higher than your current price-capped deal, seriously consider it.” If you’d like to calculate your current energy bill, visit here: https://www.energybrokers.co.uk/electricity/calculate-your-electricity-bill-online?utm_source=51+Percent+Gas+Bills&utm_medium=Article&utm_campaign=TR17_01_22
This may look expensive now, but if the price cap rises in April, such a deal would end up saving you money, even though it looks more costly now. The downside to this though is that there is a very limited amount of these lower-cost fixed rate energy deals around.
The Recent Energy Marketing Mishaps You Need to See
It may have sounded great in the meeting, but sometimes a campaign just misses the mark. Learn from the mistakes of these suppliers and avoid these marketing fails.
Energy supplier Eon sends customers socks to ‘lower’ heating bills as energy prices soar
With an ongoing energy crisis affecting households across the UK, adding hundreds of pounds to monthly bills and increased financial strain, Eon decided the best way to reassure its customers was to send them out a pair of socks.
The socks from E.ON (https://www.energybrokers.co.uk/suppliers/eon-next?utm_source=Marketing+Mishaps&utm_medium=Article&utm_campaign=TR17_01_22) arrived with the message “”Leaving lighter footprints” & a reference to rising cO2 levels.
Keep in mind, British households face some of the highest energy bills on record this winter because of record high market prices that could drive fuel poverty levels to the highest since records began.
Customers of the supplier were less than pleased with the delivery. With customers on twitter saying: “Eon?! What were you thinking sending socks to customers in light of the huge price raises ahead? Are we a joke to you?” (https://twitter.com/electricsmartie/status/1482268914398736391?s=20)
The firm sent out a message on their twitter: “If you recently received a pair of socks from us, we would like to say we are incredibly sorry for how we have made some people feel. In light of the seriousness of current challenges that many people are facing, this mailing should have been stopped and we are sorry.”
Energy firm SSE tells customers to cuddle pets and do star jumps to keep warm amid energy crisis
Britain’s third-largest energy supplier has apologized to its customers after it was criticized for sending out an email containing advice like “cuddling pets” or doing housework to avoid putting the heating on due to price hikes.
The intent of the email may seem harmless, with it suggesting 10 “simple and cost-effective ways to keep warm this winter”, however some of the advice raised eyebrows, especially considering the climate the energy market is in.
The email included suggestions like having “a cuddle with your pets and loved ones to help stay cosy” and “try cleaning the house”. Other advice includes “challenging the kids to a hula hoop contest”, “doing a few star jumps”, and “keep your oven open after you’ve finished cooking”.
Of course, the reaction from the public was less than impressive, with many mocking the advice. The unhelpful advice from Ovo comes at a time where households in Britain are set to be hit by a rise of more than 50% in energy prices in April when the energy price cap is raised, potentially costing Brits an extra £700 on their energy bills each year. To see a graph of this price hike: https://www.energybrokers.co.uk/electricity/historical-electricity-and-gas-graph?utm_source=Marketing+Mishaps&utm_medium=Article&utm_campaign=TR17_01_22
Darren Jones, the MP for Bristol North West and chair of the business select committee had called on Ovo to apologise, saying: “Being told to put on a jumper instead of turning on you’re heating if you can’t afford it, at a time of such difficulty, is plainly offensive.”
Is the Gov cutting VAT to zero?
Due to the huge increase in household energy bills around Britain, many are looking to the government to consider cutting taxes on domestic energy.
A reduction in VAT and additional Cold Weather Payments could help to limit the hit to consumers ahead of an energy price cap rise in April, say Scottish Ministers, as experts predict household energy bills could rise over 50 percent.
In a letter penned to UK Energy’s Kwasi Kwarteng, Scottish Energy Secretary Michael Matheson and Social Justice Secretary Shona Robison asked for further discussions on the issue:
“Since the start of the Covid-19 pandemic, we have been pressing the UK Government to provide more help to vulnerable households through the Warm Home Discount scheme. However, time is running out for a replacement scheme of any kind to be put in place for next winter.”
“We would urge you to make additional payments for those eligible for Cold Weather Payments as a means of targeting support for those on the lowest incomes including older people on pension credit,” they continued.
What help is available for households?
Warm home discount: Warm Home Discount is worth £140 a year. It has been at this level for nearly a decade and is a one-off reduction on bills given by energy companies, although not all suppliers provide it. The discount is allocated at a first come, first serve basis to some low-income pensioners and younger low-income households who have to apply to receive it.
Cold Weather Payment: This is a £25 payment for each seven days of sub-zero temperatures in your area between November and end of March.
Winter Fuel Payment: Worth between £100 and £300. This is paid to households with at least one person of pension age (66 and above), and some younger people on legacy benefits. It is paid automatically and covers the whole of the UK.
How much would slashing VAT save households?
VAT on domestic fuel bills in the UK is currently charged at 5%, so it would be whatever 5 percent of your energy bill is. The saving for households would depend on how much energy they use, what tariff they are on and which provider they buy from, as everyone’s energy bills are different.
To calculate your current energy bill, visit :https://www.energybrokers.co.uk/electricity/calculate-your-electricity-bill-online?utm_source=Gov+VAT+Article&utm_medium=Article&utm_campaign=TR17_01_22
Why is the government opposed to this?
Back in October 2021, Whitehall sources told the BBC that slashing the 5% VAT to zero would be ‘poorly targeted’, and that lower income households would be better helped through other schemes.
Cutting the 5% VAT would also cost the government about £1.7bn, according to HMRC estimates.