Hello, I'm Martin Lewis from money saving expert.com.
This is a video about the continuing energy bill crisis hitting the UK at the moment and
now exacerbated by the terrible situation in Ukraine.
What I want to do is talk you through the letters that millions of you are getting about
the huge, horrifying increase in energy prices coming on the first of April with a price
cut rise.
And then I want to answer the question I'm being asked by everyone, should you be looking
into a fix right now.
So first of all, the background what's going on?
Well, for the last year, we have seen an explosion in wholesale gas prices.
Those are the prices that energy firms pay for gas.
And because so much of the UK, electricity is generated by gas, it hits that too.
Right now, rates are about five times what they used to be.
And that's caused this problem, because the price cap on the first of April, is based
on wholesale prices between the beginning of August last year and the end of January.
So we've already had that period.
And we know what's going to happen, it's going to rise by 54%.
On average, there is slight regional variation.
So are you on the price cap while you're on the price cap, if you've never switched tariff,
you were on a cheap fix.
And that cheap fix ended and you didn't switch again.
Or you were with a supplier that has gone bust and you'd be moved as millions have to
the supplier of last resort.
And all that together means right now the vast majority of homes in the UK are on a
priced kept tariff.
Some of you might be lucky enough to still be on a cheap fix from before this all happened.
If so just stick with it as long as you can.
Because prices have increased so much you will be way way below what you could move
to anywhere else.
And even for the idea of moving quickly to try and bag a bargain is just not worth it.
Step on stick on your cheap fix for now.
And when it ends, the logic I'm talking about for people on the price cap will then apply
to you because you will then be moving to the price gap.
Now I'm going to talk about prices for direct debit customers now.
But if you're not on direct debit, however you pay, including prepay, the logic I'm talking
about still applies, I'm just going to use direct debit prices as an example.
So I talked about the price cap, but it isn't really a cap on the total amount that you
can pay for energy that does not exist, there is no maximum number.
Even though you may think you've heard one quoted, what really happens is the price cap
is a cap on the unit rates and standing charges we pay for gas electricity, people always
ask me what those are.
So let me give you them now.
But if you want them written down, just go into the price cap article or money saving
expert.com.
And we always list them at the top of that article.
So for gas, first of all, we're seeing a big rise a nearly doubling of the unit rate, that
rate you pay for the amount of energy use from 4.1 Pence to 7.4 Pence and the standing
charge a bit like the line rental on a telephone bill, the amount you pay per day just for
having gas is increasing slightly from 26 per day, 26.1 per day to 27.2 per day.
With electricity.
There's a big but not as big as gas jump in the unit rate it's going from 21 P to 28 P,
but the standing charge is nearly doubling there from 25 P a day to 45 P a day, lots
of people keep asking me, why is that charge going up so much.
So I asked the regulator of Jen.
And it says it reflects big increases in fixed charges that it puts into the standing charge.
So about half the cost of moving all those people whose firm went bust or suppliers of
last resort is going into that standing charge.
There are fixed network costs, there are policy increases in the cost of the green loving.
So for getting green energy supplied to all homes, even if you don't have green energy
yourself, and for the cost of the warm home discount.
And that's what's pushing that fixed fixed price up and the fixed charge up.
So when you see the letter from your company, and you see the massive rise in the standing
charge, that's because the price cap standing charge for electricity has gone up so much.
Now of course, this is a price cap.
So firms don't have to go that high, they can go lower.
But all the big players unsurprisingly have announced their new first of April prices
for their variable rates, their price cap terrorists are at or at least are not meaningfully
cheaper than the price cap.
So expect to see a 54% rise in what you pay on the first of April.
That brings me to the next issue.
The big question, should you be looking into a fixed tariff right now?
Well, just to recap what we know so far On the first of April, we're going to see a 54%
rise in the price cap.
So for someone with typical usage, just as an example, to give you scale magnitude is
rising from 1277 pounds a year to 1971 pounds a year, and yours will be rising in proportion
to that whatever you use, that price cap will last until the first of October, then it will
be changed based on the wholesale energy rates from the beginning of February, until the
end of this July.
So we're one month through that six month assessment period.
And prices are already high, especially because of what's going on the war between Russia
and Ukraine.
So the the latest analysis I've heard from corpsman analysts who I tend to think of the
most reliable on this, I've seen some other reports in the press, but they've just gone
on the spike just for one or two days, because of Ukraine, Russia, rather than looking at
this over the longer period, which is what's its assessors are assessed on is on the first
of October expect to see a 24% rise on top of the first of April rise, pushing it for
someone we're typically used to around 2450 pounds, not the 3000 pounds, which I think
is well I mean, it's possible depending on what happens over the next five months.
But we're nowhere near there yet.
This is of course still uncertain.
We're only one month through the six month period.
And there is a consultation out that the next cat might be shorter, it might not last from
the first of October until the end of March, they might start to do you know, three month
price caps.
But that's all consultation.
So I'll stick with what we know so far.
So the big question, of course, is bearing all that in mind, at what rate is it worth
getting a cheap fix, but remember, you're still on the cheap price for the next month
switch to a new firm that takes 17 days and existing firm.
It happens straightaway.
So you would lose a little bit of the current cheap rate if you fix now, the rule of thumb
is this, I would not switch to effects unless it was within around 75% More than the current
price cap or if you want to base it on the April price cap no more than 15% more than
the April price cap.
So if you can find a fix cheaper than that it is worth getting.
You will not find that on a comparison site.
There are no open market options that are anywhere near that they're all 40% More than
the April price gap the very cheapest, but there are some existing customer deals.
So this is where firms offer their existing customers cheap fixes that are within that
range.
The big one as I record this is the E.on online version 11 One year fix.
It's also for E.on next customers, which is set at the April price cap.
So knowing that we think it's going to go up in October and it's certainly not going
to drop in October, it's definitely going to go up.
We don't know how much but the current estimate is 24%.
If you can get a one year fix at the April price cap that isn't just like walking along
and suddenly discovering a gorgeous chocolate lake.
It's like walking along the discovering a chocolate lake that's calorie free and you
can eat as much as you like, I would absolutely bag that that's for E.on or E.on next customers.
And if you're looking to compare elsewhere, just do be careful that you're comparing preferably
on the unit rates, if not on the same usage.
If you were switching to another company, they might offer you a cheaper rate.
But that could be because they're estimating your direct debit to be lower.
Some people saying should I get a longer fix?
Well, not if it's a big price premium, because the current predictions are in April 2023
Prices will drop from the October price hike again, very, very uncertain.
But if you want price certainty, I know that that Aeon fix that I talked about before,
has a two year version that isn't that much more expensive.
If you wanted to go for that and you're willing to pay a little bit more in the short term,
just in case prices continue to explode.
I don't think it's a bad decision.
I just can't tell you it's the right move.
So just let me recap over the next year if you can get a fix that is no more than 15%
above the April price cap rates, which is the same as saying no more than a round 75%
above the current price cap breaks, then it's worth fixing.
Otherwise probably not if it's within a few percentage of that and you really want certainty
go for it.
But I wouldn't be fixing it 40% more than the April price cap rates.
Some people have said to me Hold on, shouldn't have fixed earlier.
Well, just because fixes were slightly cheaper earlier remember you would have had to give
up the current much much cheaper price cap that last until the end of March.
You know it's going up 54% on all the fixes you're seeing around that price.
Hope that helps.