Household energy bills are set to rise from October after regulator Ofgem raised the price cap to a three-year high.
But Money Saving Expert’s Martin Lewis has said this rise is actually “voluntary”.
That’s because the price cap will only apply to those on standard tariffs and not those on fixed rates or special deals.
The energy price cap will rise by 4 per cent from October 1 for a typical household in England, Scotland and Wales.
The regulator said bills will rise by £60 per year – or £5 per month – to £1,723 for the average household using both electricity and gas.
open image in galleryThat’s the highest average bill since July 2023.
Why has Ofgem raised the price cap?
The Middle East conflict has affected wholesale prices. In addition, the ongoing heatwaves across Europe have added further pressure by increasing gas demand for power generation to meet air conditioning and cooling demands.
What does this mean for your bills?
Currently, the typical household pays £1,663 a year for gas and electricity under the price cap.
But based on the energy use of a typical domestic household, from October, that will rise by about £60 per year , or £5 a month, to £1,723 for the average household using both electricity and gas if this level was sustained for a year.
Around 11 million households (35 per cent) are on fixed tariffs and will not be affected by this rise.
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open image in galleryDespite the rise being the highest in three years, prices remain 52 per cent below the height of the energy crisis in 2022 when the government stepped in to cap bills at £2,500, according to Ofgem.
How to check if you’re on a Price-Capped tariff
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Mr Lewis stressed that bill payers do not need to “let this happen” and they can avoid paying a higher price.
He suggested a swap from a standard tariff to a cheaper fixed tariff.
“If you’re not on a fix or special deal, you are likely to be on the Price Cap. These are firms’ standard default consumer tariffs, often called ‘Standard Variable’ or ‘Flexible’ tariffs – the ones you’re on if you’ve not switched or you had a deal that ended and did nothing,” he wrote in Money Saving Expert.
Mr Lewis explained a fix means the unit rates and standing charges are locked in and will not rise for the length of the fix, which is usually a year.
“If you fix now for less than you currently pay, you can avoid the price rises, getting rid of some of the worry. Though of course if you use more, you’ll pay more,” he said.
He added that currently there are fixes up to 8 per cent less than the current cap, which would mean those who switch would save immediately. In October when the Ofgem price cap is raised, those on the fixed rates could be paying 11 per cent less, according to Mr Lewis.