Martin Lewis: What's going to happen to energy bills over the next two years? And what government help is coming?

Watch Martin's full explanation below. You can also see our Price Guarantee guide for further information on what's happening with energy bills. Plus, see our What to do if you're struggling with your energy bills guide for more on how you can get the help you need, and our Energy Saving Tips guide for more ways to save money on your bills.

ITV's The Martin Lewis Money Show Live – Tuesday 22 November 2022

The clip above has been taken from The Martin Lewis Money Show on Tuesday 22 November 2022, with the permission of ITV Studios. All rights reserved. Watch the full episode on the ITV Hub.

Here's the full transcript of Martin's view on what's happening with energy bills

Martin Lewis: "I'm going to start with energy bills, because it's been going on all year, and they're big, and there have been changes in the budget - you will have seen this graph [see below] before and it keeps developing."

"So the story so far; wholesale gas prices have been incredibly high, that feeds into the electricity prices, and the price cap that was set by the regulator is based on wholesale prices - with a bit of a time lag. So it's gone up and up and up.

"Then in October, we got the first, where it turns green, of the energy price guarantee. That's where the Government sets the price, regardless of wholesale prices, and if it's more expensive, it pays the difference. Originally, that was set to last two years, then it was set to stop in March 2023, and in the budget, we were told it would be extended another year going on until the end of March 2024.

"But from April 2023, the rate will be higher. So from April, it increases by 20%. Now, I'm going to use typical usage because it's the only figures I've got, they haven't published the standing charges and unit rates, and it just gives you an idea of what we're talking about. Currently, the energy price guarantee is set on £2,500 a year for somebody who has typical usage - use more you pay more, use less you pay less.

"From April, it will be going up to £3,000 on typical energy usage. But what's important to understand is that, staggeringly, is a subsidised price. That isn't based on wholesale prices, that's subsidised. Now look, if we'd stayed on the old price cap system, we would have been on way more now on the old price cap system than the energy price guarantee.

"The difference is what the Government contributes to everybody's energy bills, the poorest and the richest in society - I'll leave you to make your own minds upon that."

Without the £400 energy discount next winter, you'll likely be paying on average £3,000 a year on your bill

"But let's look at what is likely to happen. On Thursday [24 November], there's going to be an announcement of the January price cap, so I don't know it yet. But here are the predictions from Cornwall Insight [see slide below] - you can see they are consistently above the energy price guarantee.

"So I asked the Government, if wholesale rates come down - so that one of those future price caps is below the energy price guarantee - what do we pay, and it confirmed to me, we would pay the price cap if it were lower. So there is a chance that these prices will be lower than the energy price guarantee.

"But there's something else you have to factor in. You've all got something to help your energy bills this winter; £67 a month, over six months, which is £400. So let's get rid of that and let's look at the £400 that you've got this winter. That effectively reduces your energy bills and everyone's energy bills, but that is not being paid next winter.

"So for somebody on typical use, pro-rata, they're paying the equivalent of £2,100 a year, this winter. Next winter, it will be £3,000. Energy prices nearly doubled from last winter to this winter, and they will be going up again by 43% - on average - next winter. And if you use less, losing that £400 has a bigger effect, and your percentage rise, I'm afraid to say, will actually be more."

Angelica Bell (Martin's co-host): "I want to bring in Kim right now because her fix has run out on her energy deal. Her question is "Having watched last week's budget, I saw the price cap is going up in April. Is it worth fixing now?""

Martin: "Well, it would be wonderful if you could, but there are no fixes. There are no cheaper deals, there are no meaningfully cheaper tariffs that you can switch to. There is nothing you can lock in to prevent yourself paying more or paying more in the future.

"We now live in a non-competitive regulated price energy world. Those are the prices that you will pay unless the price cap drops. And I think for the foreseeable future, I don't see switching tariffs coming in until maybe towards the end of 2023, maybe the start of 2024. Certainly there's nothing imminent, but I hope to be wrong on that."

Make sure you check if you're eligible for any government grants 

"Let me move on though, because there is some help coming. These are the cost of living payments that are happening this winter, and I've said it'll be 'next winter' but they've [the Government] actually just said 'next year' - my suspicion is they'll do it to coincide with the winter because that would make sense.

"So for all homes, as we've now discussed, this winter we're in the middle of getting those £66 or £67 a month - you should be getting them if you pay for electricity. However, that won't happen next winter.

"For those on benefits and tax credits, the £650 has mostly been paid - everyone who's eligible should have got it by 30 November, the vast majority have got that now.

"Next winter, that's going up to £900 - so it covers some of the gap of the lost £400 for those on benefits but not all of it. For those with disabilities, you should have had £150 and you get the same amount next winter. For state pensioners, the £300 that goes on top of the Winter Fuel Payment (which is £100 to £300), that starts being paid from 23 November and you should have got it by the middle of January 2023 - that's also going to be £300 next year.

"Now, this is important because this is a 'this winter' change. Many of you get in touch with me saying: 'well, I've got heating oil or I've got LPG - when are we getting the £100?'. Well, first of all, in the budget, it [the Government] said it won't be £100, it will be £200. It will be paid, for most people, by your electricity provider as bill credit - if you're not on electricity, they're looking at how they will pay you.

"How they will establish you use heating oil and LPG -  I don't yet know. When it will be paid - I don't know yet yet know. They just simply haven't got that information - but the payment will be bigger. We don't yet know whether that will happen next winter."

Social tariffs could be introduced to make things easier for those who don't usually switch

"And the final couple of things to note, I will do these just briefly, there are two energy consultations that may change things; the energy price guarantee in 2023 may become volumetric. What that means is you'll get cheaper rates up to a certain amount of usage and if you use more, then the rate will get higher to encourage people to use less, more of a subsidy on a lower rate - it's a consultation.

"Then from April 2024, I suspect they're hoping we go back to that competitive switching market, they want to look at a social tariff, something I've campaigned on for years. So I'm pleased to see that if we do get back into that situation, that means those people who never switch and can't switch and don't understand it, you know - someone with onset dementia who's never going to engage in the competitive market - would automatically be put on a cheaper tariff and will not have to switch anymore.

"That's the picture in the energy market."

If you don't get the cost of living payment, lowering your usage is all you can do 

Angelica: "Well Martin, it's looking pretty bleak. You're saying there's a 40% energy price rise for homes next winter, but you're saying we can't switch? So for those people who don't get cost of living payments, what can they do?"

Martin: "Well, it's very difficult, there are very few tools, the only one that's left is improving the insulation in your home, improving the energy efficiency of your home, and changing your behaviour to reduce your energy bills. That's all that is left.

"And there are lots of different ways to do that. Now I did a programme on that - it's on the ITV Hub. If you want to watch that please do, lot lots of people said it had really easy ways to cut that energy usage.

"But that is the only tool left in the arsenal currently. For those on very low incomes, there may be grants and help available. For those in the squeezed middle though - you're not getting the cost of living payment - I'm afraid it's all about your usage. Lowering your usage is the only thing that you're gonna be able to do."