The rise in the energy price cap will no doubt cause concern for millions – but financial expert Martin Lewis has insisted the latest increase is mainly “meaningless” for consumers.
This morning, regulator Ofgem increased its energy price cap to 67p per unit for electricity and 17p for gas.
While many may think that means an increase on energy bills as the cold weather bites, Lewis has sought to reassure people that they should not worry as the government’s energy price guarantee means consumers' bills for electricity will be capped at 34p per unit and gas at 10.3p until April.
As the government is paying the difference between their guarantee and the price cap, bills should essentially remain at the same levels they are already at.
This equates to around £2,500 annual bill for the typical household. Many people's actual bills will be higher than that depending on how much energy they use.
He tweeted: “The guarantee is set by the govt eg for a home on typical use its £2,500 now, rising to £3,000 Apr 23. The price cap is based on wholesale rates (with a time lag) and dictates what energy firms can charge.
“When the cap is higher than the guarantee (as it is now) the state pays the difference, household bills are still at the guarantee rate.”
Without the government support, the average household would be paying around £4,279 for its energy under the new cap.
Watch: Average energy bill to rise to £3,000 a year from April under government 'guarantee'
Despite the reassurance from Lewis that consumer won’t spend more, he warned that higher borrowing and taxes could be a longer-term problem as the government attempts to claw back the estimated £15.1bn it is costing to subsidise household bills between January and March.
And with the energy price guarantee increasing from £2,500 to £3,000 in April, bills will then go up by an average 20% for most consumers.
What is the energy price cap?
Ofgem introduced the energy price cap in 2019 as a way to protect consumers over concerns they were paying too much for their energy.
The cap, which is now reviewed every three months, limits the maximum amount that energy suppliers can charge consumers for each unit of energy used.
The cap was due to rise by 80% in October for millions of people prior to the government introducing the energy price guarantee, meaning that the state would pay energy companies the difference between the price guarantee and the price cap.
In light of the concerns of energy prices, Ofgem has urged 17 British energy suppliers to improve how they deal with vulnerable customers.
Ofgem’s director of retail, Neil Lawrence, said that “most suppliers” take their responsibility to protect vulnerable customers seriously and that they have launched many new initiatives.
But despite some improvement, he said there were “a number of failings across the board which need to be urgently addressed”.