Personal finance guru Martin Lewis has warned that despite record-high energy prices being forecast to fall in the months ahead, households won’t feel “any real benefit”.
In less than two years, the price cap set by regulator Ofgem has rocketed from £1,162 a year for a typical household in August 2021 to its current level of £3,280, having briefly reached £4,279, with the pandemic and Russia’s war in Ukraine having both served to push up wholesale prices.
Customers have been partly shielded from the most recent rise by the government’s Energy Price Guarantee – which limits annual energy costs to £2,500 for the average household. But that is set to finish at the end of June – and a government minister on Sunday appeared to rule out further support.
New forecasts by energy consultancy Cornwall Insight predict that Ofgem’s cap will fall dramatically to £2,054 in July, saving households an average of £446 a year.
This forecast remains well above pre-pandemic levels, and Cornwall Insight warned this week that these higher prices “may become the new normal”, as it predicted the cap would remain at similar levels until at least January 2024.
Despite the predicted fall, Mr Lewis warned that there are “monumental questions” hanging over the system governing “consumer energy bills” in the UK and accused of those in charge in recent years of having “been asleep at the wheel”.
Asked about the price cap changes expected to be announced on Thursday, the Money Saving Expert founder told the BBC’s Sunday with Laura Kuenssberg show: “In practical terms what you pay from July will drop by somewhere between 15 and 20 per cent – we’re pretty sure it’s in that ballpark.
“Then the next price cap comes in October. The current prediction – and the further out you go, the more crystal ball gazing it is – is that it will drop a little bit more and then go up a little bit in January, but still be roughly the same amount it is now.”
“It is an improvement, [but] it’s not the biggest improvement,” Mr Lewis said, pointing to the fact that the £400 of government support handed out universally during the winter also came to an end in April.
“In practical terms, people aren’t going to feel any real benefits. They’re going to be paying the same thing that they were over winter, and next winter will be as expensive as the winter just gone – which is over double what we always thought.”
The standing charge – the roughly £300 paid per year by households for merely accessing gas and electricity – is unlikely to fall, Mr Lewis said.
“We have monumental questions about consumer energy bills coming forward – they’re too expensive, they’re badly structured, there’s no competition in the marketplace. Obviously, the people who have been in charge have been asleep at the wheel for the last few years, and things need to change.”
On the issue of standing charges, environment secretary Therese Coffey said she expected the government “will continue to look at the different ways that those charges are put through to bill payers”, claiming that there is “considerable support” being given to households struggling with soaring bills.
Only those in receipt of means-tested benefits, pensioners and those with disabilities are currently set to receive further assistance with their energy bills, amounting to £900, £300 and £150 respectively.
Responding that the £2,000 price cap is “unaffordable” for households living “just above the threshold” to qualify for the existing support, Mr Lewis asked Ms Coffey whether there would be any help for those people.
The minister said: “The chancellor set out our plans several months ago on what was happening there and I am aware there is only a limited amount going to every bill payer.
“But I think that the critical thing that people will be expecting from the government is getting that electricity pipeline flowing within our own country rather than constantly being reliant on aspects of the link to the gas prices in the world.”
Arguing that the government’s Energy Price Guarantee is set to end nine months earlier than predicted, having cost “tens of billions of pounds less” than expected, Mr Lewis said: “There is money [available to the government] to help those on lower and middle incomes.”