Martin Lewis has issued updated advice on when he believes would be the best time to fix energy bills, given the fluctuating prices.
Ofgem recently announced a forthcoming reduction in the energy price cap to £1,568 starting July 1 a 7 percent decrease from the current £1,690 cap.
However, there’s a catch: Cornwall Insight forecasts suggest an upswing of as much as 12 per cent from October 1 – signalling higher energy costs for households during the colder months.
The latest bulletin from Money Saving Expert (MSE) suggests that, in light of the anticipated hike in autumn, the fixed deals now available could be appealing and potentially lead to savings over the coming year.
According to MSE, the July drop in the price cap is likely the last we’ll see for some time, with customers set to pay £93 from July for every £100 spent currently.
From October, the price cap figure is expected to rise to £104 for every £100 paid today. The price cap is then projected to “stay flat” from January onwards. Summing up the year, this equates to an overall bill increase of two percent over 12 months, reports the Manchester Evening News.
MSE cautions its readers, however, stating: “Of course, this isn’t set in stone – the predictions can significantly change over time.”
He added: “But at the moment, it doesn’t look great over the next year.”
MoneySavingExpert.com has highlighted that now is a prime time to secure your energy bills, with the cheapest standalone fix currently undercutting the price cap by nine percent. “Contrast that to price cap predictions over the next year of a two per cent rise, and it’s the biggest ‘fixing benefit’ we’ve seen since the energy crisis started,” MSE pointed out.
Yet, Martin Lewis, the founder of MSE, has clarified the common confusion surrounding the timing of fixing energy bills. Addressing the frequently asked question, “is it worth waiting until July to fix?” Martin elucidated: “I get asked this a lot, but often it’s based on a confusion.”
He further explained that the Ofgem price cap only affects the standard variable tariff and not fixed deals, which are not subject to the cap. Fixed rates depend on the current cost for energy firms to purchase energy when they propose the fix.
Martin elaborated on the disconnect between the price cap and future fixed rates: “We have no clue what that will be in July. It may be cheaper than now, it may be more expensive – it’s about world markets. The price cap dropping has virtually no impact; it’s based on PAST wholesale prices – so it’s completely delinked.”
He further explained: “Of course, when the price cap moves, it changes the differential between its price and the cost of a fix (and firms may factor it in at the margins to their pricing decisions, as to how cheap they have to be to win market share). Yet remember you’re fixing for a year (or more) and each price cap period only lasts three months. So the instant price is only a quarter of the decision anyway.”
“That’s why we try and base our assessment of whether you’ll save on Cornwall Insight’s predictions for the year ahead. So if you want to fix, as the differential looks decent now, it’s a decent bet at the moment.”
MSE also issued a warning to those who pay their energy bills via direct debit and are currently “in energy credit”, advising them to consider asking for some of their money back. “This is the time of year when those paying by monthly Direct Debit should have the least energy credit,” MSE clarified.
The experts suggest that if your account has more than a month’s worth of credit, you should request the extra cash to be refunded.
One of Martin’s followers, Andy, had previously reached out to MSE to share his experience of getting money back after discovering he had overpaid thousands to his energy company. He shared with MSE: “I went to my energy supplier today to input my gas/elec readings as per your piece on breakfast TV, and was shocked to see I was £2,016 IN CREDIT. Many thanks.”
