Martin Lewis is warning of a ‘bleak winter’ ahead for millions of households after new data published by Cornwall Insight suggested that Ofgem’s price cap is set to rise by 64 per cent, taking the annual cost for a typical user on a standard tariff to £3,245 from October 1. The energy analysts also suggested that the price cap could go up by a further £360 in January to £3,364.
Gas and electricity customers across the country are already trying to cope with the current price cap of £1,971, whose impact may not be fully felt during the summer months, but when the season changes, the founder of MoneySavingExpert.com (MSE) says the cost of living crisis is set to “climax in catastrophe”.
In the latest edition of the MSE weekly newsletter, the financial guru explains what lies ahead and how to mitigate the unfathomable price hikes as best you can - he’s even managed to pinpoint a new ‘magical number’ for existing customers offered a tariff fix.
Martin wrote: “Enjoy this week's warmth. The coming winter will be bleak, the cost of living crisis is set to climax in catastrophe, unless there is further intervention.”
Martin added that he “sounded the alarm” during an interview on BBC Radio 4’s PM programme last week, where he described the energy crisis as a “cataclysmic issue” for the UK Government.
On the flagship evening news programme, the consumer champion highlighted that the current £15 billion package of support does not cover the new increased predictions and warned that people receiving State Pension will be forced to use one-third of their annual payment, which is worth around £9,500 per year, to pay for energy bills.
He also took to Twitter to warn his 1.6 million followers that not having a new prime minister in place until September 5 is “too late” to prevent the “panic” that will arise following the official confirmation from Ofgem of the October price cap, due to be announced in August.
He warned that by then, direct debits will already be rising, not leaving ministers enough time to act, something he reiterated in the newsletter.
Martin wrote: “I sounded an alarm for politicians on Radio 4 on Friday. I'd love to ask all Conservative leadership candidates what they propose to do to avert energy bill disaster, and when?
“Though the clock is ticking, by the time the new PM is in place, we'll know the new price cap, so rising direct debits will be panicking millions.”
Martin has listed the key points everyone should be aware of are on fixing, changes to direct debits, claiming the cost of living payments and reducing your energy usage to lower bills.
You can read Martin’s full guide to the energy and cost of living crisis on MoneySavingExpert.com here.
Fixing your energy tariff
A few weeks ago, the financial journalist shared new energy tariff deals for existing customers - most of which disappeared shortly after word got out.
But in this week’s MSE newsletter, he tackles the familiar ‘should I fix now?’ dilemma again, given the new predictions for October.
He explained: “Based on those predictions, over the next year you'll pay 57% more than the current price cap for energy.
“So if you can find a fix at less than that, it's worth considering, though the cost of fixes have rocketed in the past fortnight too.”
Full help and analysis on this is in his ‘Should I fix?’ guide on MSE.com here.
Martin also highlighted changes to energy direct debit rules, standing charges, debt collection and more may be on the way following a meeting last week with members of the MSE team, representatives from leading charities including Citizens Advice, National Energy Action and StepChange, CEO’s of OVO, British Gas, Octopus, E.ON, EDF and Shell, to discuss the crisis facing many families this winter.
The group of leading charities and energy companies assembled to find ways to support struggling customers this winter.
All attendees aligned on the unprecedented challenges ahead and the group agreed to work together on changes that can be implemented before the winter.
The group plans to reconvene in September.
Martin said: “The agenda was to try and deal with some low hanging fruit issues. It was a productive, action-orientated two hours.”
You can read the full summary of the details discussed at the meeting on MSE.com here.
Stark reality of £3,245 October price cap
Martin shared on Twitter the implications for households if the predictions from Cornwall Insights prove to be correct.
This is an estimate of how bills on the current price cap will increase:
- If you pay £50 per month now - £85 from October
- If you pay £100 per month now - £165 from October
- If you pay £150 per month now - £250 from October
- If you pay £200 per month now - £330 from October
- If you pay £250 per month now - £415 from October
- If you pay £300 per month now - £495 from October £510
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Cost of living support
Before he left office, former chancellor Rishi Sunak announced a £15 billion package to help with the rising cost of living.
It promised up to £1,200 for the most vulnerable households. But the price cap was at £1,277 last winter, so if Cornwall's January predictions of a cap reaching £3,364 are correct, households will be left nearly £900 worse off than they were before the crisis started - even with the maximum help from the UK Government.
The first cost of living payments for £326 will start landing in bank accounts from July 13 until the end of the month.
To make sure you’re not missing out on any extra financial support, use a benefits calculator to quickly check for extra cash or discounts you may be entitled to - find out more here.
To keep up to date with the latest energy news, join our Money Saving Scotland Facebook group here or subscribe to our newsletter which goes out three times each week - sign up here.