This info was first written and published in our weekly email on Wednesday 13 Oct 2021.
'DO NOTHING. Don't switch energy firm. Inaction is the best action... unless they're trying to double your direct debit'
Martin's energy bills crisis Q&A...
The energy market is in crisis. Firms are failing. Bills are rocketing. The cheapest fixed deals are double the price of a year ago. The energy price cap rose 12% (13% prepay) on 1 Oct. It's all on the back of an explosion in the cost of wholesale gas. No surprise many are worried, and we're swamped with questions. So we've put the most common to MSE founder Martin Lewis - you can read them here or if you prefer to watch, see Martin's ITV energy bills crisis special...
Q. With prices rocketing, should I try to bag a cheaper deal?
Martin: No. DO NOTHING - the energy price cap is the cheapest deal. The price cap limits what providers can charge on their standard variable (default) tariffs. There are no meaningfully cheaper switches available right now. The cheapest fixed deal is 35% higher (around £450/year more for someone on typical bills), and my best guess is that gap makes it too big a premium to make it worth moving right now, but check for yourself by doing a Cheap Energy Club comparison.
As you'll be on the price cap, or AUTO-moved to it, if: 1) You've never switched. 2) Your cheap fix ends. 3) Your provider goes bust and you're moved to a new firm - that means do nowt and you'll be on, or moved to, today's cheapest deal.
Q. The price cap is £1,277/yr, does that mean it's the most I can pay?
Martin: No. 'Price cap' is a stupid name - it's more of a rate cap. There's no maximum you can pay for your domestic energy. The £1,277/yr rate is just what the cap would be for someone on the regulator's defined 'typical use'. The best way to think of it is as a cap on the rate you pay for each unit of energy you use. So use more, and you pay more.
Q. I'm comfortably in credit, but my firm's hugely hiked my direct debit, is this fair?
Martin: It's not fair if it's out of proportion to the cost rise, and it's worrying. I'm hearing this a lot - some have seen their direct debit (DD) double. The DD is designed to smooth out your energy costs across a year. Going into winter, it's normal to be a month or so in credit. So as the price cap has risen 12%, if you're on it, expect a similar DD hike. If you're coming off a cheap fix and paying 30-40% more, expect that too.
Yet if you're in credit and your DD is rising way above the rate rise, there's an issue. Do read our full Energy DD help, but in brief, first, do a meter reading, so any DD estimate is based on up-to-date usage. Once that's processed, call and politely ask the firm to justify the hike. You've a right to a 'fair direct debit' under energy firm licence conditions. If it can't, ask for the DD to be lowered. My concern is some firms are hiking DDs right now to help their cash flow, even when it isn't justified.
Has your energy direct debit been increased? Please vote.
Q. Is it true the price cap will rise again in April?
Martin: Almost certainly yes, possibly by 30%+. Each cap lasts six months - the current one finishes on 31 March. It's best to think of it as a six-month fixed tariff you can leave at any time if, and hopefully when, other tariffs get cheaper.
Come April, sadly, we expect the cap to rise hugely again based on its current run-rate (yet that'll still be less than today's cheapest fixes). We know this as the assessment period to set the level of the April cap started in August, just as wholesale rates exploded. See how the price cap is set for more.
Q. I'm on a cheap fix, should I leave it as I'm worried my firm may go bust?
Martin: No, do nothing, relish the cheapness while you can. If your firm goes bust you'll almost certainly be moved to a new provider at the price cap - the cheapest you can get now anyway - and all your credit is protected (though do screenshot now how much credit you have). So you may as well stick with your low rate for as long as you can.
Q. My energy firm (Igloo, Avro, Green etc) has gone bust. How much more will I pay?
Martin: For most on cheap fixes, it'll be 10-40% more than you were paying. We've full analysis of the new deals for Avro, Green, Igloo, PFP, People's, Symbio Energy and Utility Point customers.
Q. I'm really worried I can't afford to pay my bills - what do I do?
Martin: Speak to your supplier as soon as possible. Emergency pandemic rules mean your supply can't be cut off and prepay customers can get emergency credit. Yet communicate and let your supplier know you're vulnerable. It may be able to offer payment reviews, breaks or reductions. Also check our 2021/22 warm home discount and home & energy grants help. And review all your finances too, including doing a 10-min benefits check-up and a money makeover.
Do your figures include VAT?
How can I contact Cheap Energy Club?
How does the comparison calculator work?
How is Ofgem's price cap factored in to my results?
I've called the supplier and it knows nothing about the switch
How do I update my usage or tariff details on my Cheap Energy Club account?
When will I get my cashback?