Martin Lewis Urges UK Households to Act on Dropping Energy Prices
MoneySavingExpert founder Martin Lewis has issued a timely warning to UK households, suggesting that "now could be the best time" to take action to potentially save on energy costs. This follows the announcement by Ofgem, the UK's energy regulator, that the Energy Price Cap will be cut by 6.7% from April 1 for a three-month period.
Understanding the Price Cap Reduction
Martin Lewis emphasised that while the price cap drop is significant, it is "only half the story." He stressed the importance for homeowners to understand what this actually means for their bills, as it could lead to substantial savings. In an Instagram clip, he explained: "All tariffs, even if you are already on a fix, will see the rate dropping in April. People on an existing fix, that price is going to come down, too."
According to Lewis, approximately 60% of UK households remain on the standard variable tariff, which is determined by fluctuating wholesale prices for gas and electricity and governed by the Ofgem Energy Price Cap. Consumers typically end up on this rate if they take no action after their previous deal with their energy supplier expires.
Key Changes in Energy Rates
Martin Lewis detailed how gas and electricity rates will shift in the coming weeks, which should result in lower bills for most UK households:
- Electricity unit rate: Coming down by about 10.9% per kilowatt hour
- Electricity standing charge: Going up by 4.5% per day
- Gas unit rate: Going down by 3.2%
- Gas standing charge: Going down by 17%
He elaborated: "Overall, the biggest winners here are those who are high-using, electricity-only customers. But everyone should see a reduction in general, apart from the very lowest users, and even then, it will be trivial once you add up gas and electricity together."
What is the Energy Price Cap?
The Energy Price Cap is determined by Ofgem (the Office of Gas and Electricity Markets). It restricts the maximum amount suppliers can charge per unit of gas and electricity (kWh) and establishes the maximum daily standing charge for default (standard variable) tariffs. Its rulings affect households across England, Scotland, and Wales. In Northern Ireland, the Utility Regulator oversees energy suppliers and sets the equivalent of the price cap.
It is crucial to note that the cap does not impose a maximum total bill but instead a maximum rate, meaning consumers pay more when they use more energy. It was introduced in 2019 to protect consumers from soaring prices.
Reasons Behind the Price Drop
Martin Lewis explained the underlying reasons for the Price Cap reduction: "This time around, [people] need to understand that the main reason the Price Cap is dropping is the same as the reason we're going to see other tariffs dropping on April 1. That is because there have been underlying changes to the policy costs of energy."
He highlighted that an ECO scheme ends in March, coming off bills, and a renewable obligation that is paid for on bills is having 75% of its cost shifted from energy bills to the state, funded by general taxation or debt. "Those policy amounts are coming off the bill, and because of that, that's what is driving the Price Cap down. It also means that all other tariffs are coming down too. If you are on a fix, whether you fix today or on an existing fix, expect to see your rate drop by seven to nine per cent [from April 1]."
Actionable Advice for Consumers
MoneySavingExpert suggested that now would be "a pretty good time to fix" for those needing to renew their energy bills. Martin Lewis pointed people to his Cheap Energy Club page on the Martin Lewis website to compare and find the most suitable deal based on household energy consumption.
He cautioned that anyone paying the standard variable rate "should get off it" by switching to a better deal, emphasising that the current moment could be an ideal opportunity to slash energy spending.
In related utility news, Martin's team previously advised people to make a "quick check" regarding their water bills. Seeing if homes are eligible for discounts could reduce bills by up to 50% in parts of the UK.
