The founder of Money Saving Expert said the new Ofgem price cap rise will hit households on standard tariffs hardest.
Martin Lewis said the new Ofgem price cap rise will hit households on standard tariffs hardest.(Image: ITV)
Martin Lewis has warned millions of households could avoid the new 13 per cent energy price cap rise coming into force from July by switching away from standard tariffs.
Ofgem confirmed on Wednesday that the energy price cap will rise from £1,641 to £1,862 on July 1, pushing annual bills up by £209 for 22million households on the standard tariff in Scotland, England and Wales. The new cap, which will remain in place until September 30.
The rise follows ongoing instability in wholesale energy markets linked to the conflict in the Middle East, with gas prices seeing the biggest jump. Reacting to the announcement, Martin said the increase would hit households using more gas particularly hard because the changes are focused on unit rates rather than standing charges.
READ MORE: Martin Lewis urges households to check energy accounts for hidden cash refundsREAD MORE: Ofgem confirms new energy price cap will add £209 to annual bills from July
Martin explained: “The Middle East conflict will finally force its way onto most people’s energy bills from July, with a 13 per cent rise in the Price Cap.
“The hit will be biggest for higher users, especially those who use gas, as the change is in the cost of each unit of energy used rather than the daily standing charge. The gas unit rate is up 28 per cent, with electricity up 6 per cent.”
However, the financial guru stressed that the higher cap only applies to households on standard variable tariffs and said many direct debit customers could immediately reduce costs by switching to a fixed deal.
He said: “Those on fixes won’t see a rise. And that means everyone on the price cap should consider getting off it, if they can, for example, by locking in a fixed rate below the current cap – up to 3 per cent below.
“Do that, and you start saving straight away, and then from July the fix will be 14 per cent cheaper than the cap.”
Martin also warned forecasts suggest the price cap could rise again in October, meaning households who delay switching may face even higher costs later this year.
He added: “Fixing seems the risk-averse bet for most.”
The consumer champion said households should compare deals across the whole market rather than simply accepting offers from their existing supplier.
He also warned some comparison sites do not show all tariffs automatically because certain energy firms do not pay commission fees.
Martin said: “Don’t stick with your own firm’s fix though, many firms don’t have cheap deals.
“Your exact cheapest tariff depends on usage and where you live, so ensure you do a whole-of-market comparison.”
Ofgem said the latest rise means a typical household paying by direct debit on a standard tariff will see annual bills increase by around £209, equivalent to roughly £18 a month.
