Martin Lewis reveals how new energy price cap will ‘directly change your bill’
| Last updated
Brits are having to get ready for a change in their energy bills so it's lucky we've got someone like Martin Lewis to go through all the details of what it's actually going to mean.
What most people want to know is what impact the changes are going to have on our bills following Ofgem's price cap cut from the £2,500 figure imposed during the cost of living crisis.
The announcement on 25 May marks the first time people on default tariffs will see energy prices fall for 18 months, with the price cap at one point reaching a peak of £4,279.
Ofgem have said the price cap falling will save the average household £426 a year on their gas and electricity bills, but the reality is a bit more complicated as Lewis has explained that figure is 'mostly meaningless'.
The Money Saving Expert has gone through the changes and explained what it's actually going to mean for people.
"The good news is the rate is about to drop by an average 17 percent. In other words, for every £100 you pay on gas and electricity, from July you will pay £83," Lewis said in a video about the issue.
"Now the regulator itself uses this 'typical use' figure, saying it's dropping from £2,500 to 2,074, frankly that's mostly meaningless because no one's on the typical use which is why I prefer to talk about it in terms of the percentage drop."
"But in actual practical terms it's the maximum rate you can pay that changes. I say maximum, all of them charged the maximum, they could go cheaper, they don't. Or aren't at the moment anyway.
"The bad news is the high daily standing charge that you pay will remain unchanged after the 1st of July. It will continue to be an average of 53p per day for electricity, 29p a day for gas. So in other words you will pay £300 a year just for having the facility of having gas and electricity."
"What's actually happening to cut the price is the unit rates that you pay are being decreased an average of 3p per kilowatt hour, meaning electricity will go to 30.1p per kilowatt hour, gas to 7.5p per kilowatt hour."
Lewis also took the chance to mention what things would be like for people on prepayment meters for their energy, saying they would 'likely see a slightly bigger drop than 17 percent' because on 1 July for the first time prepayment meters would be equalised with customers on direct debits.
Since direct debit is going down by 17 percent, that means prepayment metres will fall by that amount too, plus a little bit more.
Going back to the 'every £100 you pay on gas and electricity' example, Lewis explained that people on prepayment meters would likely see that figure go down to about £31.
He is having to guess a little bit at this point as the exact figures for prepayment haven't yet been published.
As for folks on a direct debit, he said they should 'not expect it to alter quickly' and it might not even change after 1 July as for energy companies 'it depends on when they reassess'.
Topics: Martin Lewis, UK News, Money