Wokingham and Bracknell Lifestyle Dec 2021 - Jan 2022

Advice from money
expert - Martin Lewis
on how to handle the
situation caused by the
current energy problems
Energy Bills Crisis
Do nothing. Don’t switch energy firm.
Inaction is the best action right now…
unless they’re trying to double your direct
debit.
The energy market is in crisis; prices are
rising, and energy firms are falling. The
cheapest fixed deals cost twice what they
did a year ago. The energy price cap went
up 12% this month (13% prepay) and
more rises are due.
It’s all due to an explosion in the cost of
wholesale gas - and as in the UK we often
use gas to generate electricity, the price
of that is up too. No surprise many people
are panicking, and I’ve been swamped
with questions - so let me run through
the most common ones (my answers are
correct at the time of writing).
Q: With prices rocketing, should I
try to bag a cheaper deal?
A: No. DO NOTHING – the energy price
cap is the cheapest deal. The price cap
limits what providers can charge on their
standard variable (default) tariffs. There
are no meaningfully cheaper switches
available right now.
You’ll be on the price cap, or
AUTOMATICALLY moved to it, if:
- You’ve never switched.
- Your cheap fix ends.
- Your provider goes bust and you’re
moved to a new firm.
So do nowt and you’ll be on, or moved to,
today’s cheapest deal.
The cheapest fixed deal is 35% higher
(around £450/year more for someone on
typical bills). My best guess is that’s too
much of a premium for most to move right
now, but check for yourself by doing a
whole of market comparison, either via
my www.cheapenergyclub.com or any
Ofgem-accredited site (there’s a list at
www.ofgem.org.uk).
Q: I’ve heard the price cap is £1,277/
year, does that mean it’s the most I
can pay?
A: No. ‘Price cap’ is a stupid name - it’s
more of a rate cap. There’s no maximum
you can pay for your domestic energy.
The £1,277/year figure is just what the cap
would be for someone on the regulator’s
defined ‘typical use’.
30 | www.minervamagazines.co.uk
While it’s more complicated than this in
reality, the best way to think of it is as a
cap on the rate you pay for each unit of
energy you use. So use more, and you
pay more.
Q: Is it true the price cap will rise
again in April?
A: Almost certainly yes, possibly by 30%
or more. Each cap lasts six months - the
current one finishes on 31 March. It’s best
to think of it as a six-month fixed tariff
you can leave at any time if, and hopefully
when, other tariffs get cheaper.
We have a very good idea what the next
cap will be because it’s based on average
wholesale prices from Aug 2021 to Jan
2022, and we’re already a third of a way
through that. Sadly, come 1 April, the
cap is expected to rise likely by at least
30% (so £400/yr for someone with typical
bills) - yet that’ll still be less than today’s
cheapest fixes.
Q: Does all this apply to the whole
of the UK?
A: No. It is correct for England, Scotland
and Wales, but Northern Ireland has a
different system. For more on that see
www.consumercouncil.org.uk.
Q: I’m comfortably in credit, but
my firm’s hugely hiked my direct
debit, is this fair?
A: It’s not fair if it’s out of proportion to the
cost rise, and it’s worrying. I’m hearing
this a lot - some have seen their direct
debit double. Generally, direct debits are
designed to smooth out your energy costs
across a year. Going into winter, it’s normal
to be a month or so in credit. So as the
price cap has risen 12%, if you’re on it,
expect a similar direct debit hike. If you’re
coming off a cheap fix and paying 30-40%
more, expect that too.
Yet if you’re in credit and your direct debit
is rising way above the rate rise, there’s
an issue. But you don’t have to accept it.
First, do a meter reading, so any direct
debit calculation is based on up-to-date
usage. Once that’s processed, call and
politely ask the firm to justify the hike.
You’ve a right to a fair direct debit under
energy firm licence conditions.
If it can’t, ask for the direct debit to be
lowered. My concern is some firms are
hiking direct debit right now to help their
cash flow, even when it isn’t justified.
Q: I’m on a cheap fix, should I leave
it as I’m worried my firm may go
bust?
A: No. To stick with my theme, do nothing
- relish the cheapness while you can.
If your firm goes bust, you’ll almost
certainly be moved to a new provider
at the price cap - the cheapest you can
get now anyway - and all your credit is
protected (though, whichever firm you’re
with, do screenshot now how much credit
you have). So you may as well stick with
your low rate for as long as you can.
Q: My energy firm (Pure Planet,
Avro, Green etc) has gone bust. How
much more will I pay?
A: For most on cheap fixes, shifting to the
price cap will mean paying 10-40% more
than you were before. Though at least you
saved in the meantime, and you’re now on
the same rate you would’ve been on had
you not switched. You can see a full list of
all firms that have gone bust, who the new
provider is, and the cost change at www.
mse.me/EnergyShift
Q: I’m really worried I can’t afford
to pay my bills - what do I do?
A: Emergency pandemic rules mean
your supply can’t be cut off and prepay
customers can get emergency credit.
The best thing to do is communicate
your supplier, and let it know if you’re
vulnerable. It may be able to offer payment
reviews, breaks or reductions. Check if
you’re eligible for the £140 Warm Home
Discount (available from bigger firms
if you’re on the guaranteed element of
pension credit or on a low income and
getting certain benefits).
Martin Lewis is the Founder and Chair
of MoneySavingExpert.com. To join
the 7.5 million people who get his free
Money Tips weekly email, go to www.
moneysavingexpert.com/latesttip