The price cap is now the cheapest, meaningful deal you can get
Martin admitted that a year ago he would have told people to avoid energy regulator Ofgem’s price cap on standard variable tariffs, as that was significantly more expensive than the cheapest fixed deals.
In November 2020, the cheapest fix was around £830/yr for typical use. In comparison, because of extreme energy price hikes, the cheapest fix typical energy users can get today stands at £1,730/yr. Martin explained: “So that is over double the amount that you would have paid a year ago. A huge and phenomenal increase.”
Yet since news of the energy crisis broke, which has seen 23 energy firms go bust since September, Martin has repeatedly told households to “do nothing” and to go onto Ofgem’s price cap when their fixed deal ends or, to stick with it if they were already on it, and his message remained the same in this week’s episode.
Martin said: “Because the price cap moves every six months, and is now based on a time lag, it is now the cheapest, meaningful tariff you can get.” By sticking with the energy price cap, households with typical usage can expect to pay £1,277/yr, which is less than the current cheapest fix.
Addressing audience members, Martin asked: “So what would you do?” His response: “Do nothing.”
Expect a horrendous rise in April – but it’s likely to still be cheaper compared to fixing
The current price cap is only locked in until April 2022, and Martin warned that people can expect to pay between £1,700/yr and £1,830/yr then based on predictions. That’s because the next price cap is currently due to be based on wholesale prices between the end of July this year, and the end of January 2022.
Martin said: “It’s a horrendous rise, but this is the thing you need to think about: compare it to the cheapest fix.” He explained that by sticking with your current deal, you should save until April compared to fixing, and when prices go up then, you’ll likely still be paying less compared to the cheapest fix you can get now.
However, Martin did stress that this was only his best guess now and it’s impossible to know for certain without a crystal ball.