MoneySavingExpert founder Martin Lewis said many homes are heading for “energy bill disaster” – but had advice to help Brits prepare.
Energy bills could hit an eye-watering £3,300 on average this winter as the cost of living crisis continues to grip families.
Speaking in this week’s MoneySavingExpert email , Lewis said: “The coming winter will be bleak, the cost of living crisis is set to climax in catastrophe, unless there is further intervention.
“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. For now, let me explain what’s coming, and try to mitigate it where I can.”
The Ofgem price cap, which sets a limit on how high variable-rate energy bills can be for average use households paying by direct debit.
The price cap is currently set at £1,971 and covers 22 million households.
Here are Lewis’s need-to-knows about the future of energy bills.
October price cap predictions have rocketed
Lewis said if you pay £50 a month now, you are set to pay £85 a month from October – because the price cap is going up.
Latest predictions from analysts at Cornwall Insight suggest this price cap could rise to £3,244 from October – up from the £3,003 figure they estimated just two weeks ago.
If you pay £150 a month now, you’re predicted to pay £250 a month from October.
Those paying £200 a month currently will face bills of £330 a month.
For those paying £300 on energy in a month, they face a rise to £495 when the price cap goes up.
Lewis added: “This price cap is mostly predictable as it is dictated by regulator Ofgem’s published algorithm, based mainly on year-ahead wholesale prices. These have spiked in recent weeks, so analysts Cornwall Insight’s latest predictions are frightening.”
How to know if a fixed rate is right for you
More than 80% of UK households are now on variable-rate deals.
Mostly that is because the price of variable-rate deals are limited by the Ofgem price cap.
But that is also because there are very few fixed rate options on the market – especially any cheaper than variable rate ones.
Lewis said: “Based on those predictions, over the next year you’ll pay 57% more than the current price cap for energy.”
He added that: “if you can find a fix at less than that, it’s worth considering”.
Save cash if you can
If you are able to set aside any cash before energy bills rise again this is worth doing, Lewis said.
“I know that’s a pipe dream for many,” he went on.
“Yet for those who do have savings or currently spend less than you earn, putting some aside or even asking for your energy direct debit to rise should ease the winter cash-flow pain.
See if you can cut your energy use
With variable-rate energy deals you pay for the energy you use.
The more units you consume, the more you pay.
With that in mind, Lewis said it makes sense to cut energy use if possible.
MoneySavingExpert’s tip to reduce energy bills include fitting a water-saving shower head.
These can cut energy use by 2% a year – and of course, they use less water too.
Picking energy-saving bulbs is another top tip – but LED ones use half the power of the spiral flourescent varieties.
Spending one minute less in the shower could save an astonishing £75 a year in energy costs for a family of four – and £105 in water bills.
Ditching your tumble dryer is another good way to save cash. The Energy Saving Trust thinks you could save £60 a year by air-drying your clothes, if possible.