Martin Lewis: April's 20% energy price rise likely to be cancelled as energy firms assume it won't happen

It comes as over 110 charities have joined Martin and MSE's campaign calling on the Chancellor to keep the Energy Price Guarantee (EPG) at a typical £2,500 a year, rather than hiking it to £3,000 a year from 1 April 2023 as planned.

Watch: Martin's interview about energy bills on Radio 4's Today programme – Friday 3 March

Courtesy of BBC Radio 4. All rights reserved. Listen to the full programme on BBC Sounds.

Here's the transcript of what Martin Lewis said on the programme…

Below is a direct transcript of what Martin said in his interview with Nick Robinson, though we've broken it up into sections for ease.

Is a U-turn coming?

Nick Robinson: "Energy companies are preparing for the Government to do a U-turn to keep subsidising bills after April, when that help is due to be withdrawn. That's what our business editor, Simon Jack, has been reporting for us this morning.

"A few weeks ago Martin Lewis, the founder of MoneySavingExpert.com, warned on this programme that allowing bills to rise again would be a national act of self-harm. Martin joins us on the programme once again. Morning to you, Martin."

Martin Lewis: "Good morning."

Nick Robinson: "We're all having to guess, aren't we, by the behaviour of the energy companies who plan their pricing some weeks ahead. Do you share Simon's view that this pricing decision suggests that this U-turn is in the offing?"

Keeping the current energy price guarantee is a 'no-brainer'

Martin: "I do, I wouldn't say it's a done deal. I've been saying all week I think there was a better than 50% chance that the campaign we've been running... I wrote a letter to the Chancellor three weeks ago.

"It's now backed by 110 major charities, including the likes of Which and Citizens Advice and Alzheimer's [Society] and the Samaritans and many others. It’s backed by Energy UK, which is the trade body of the energy industry saying, you know, don't do this: it’s not good for individuals to put prices up, it’s not good for people’s mental health, it’s not good for consumer confidence, which means it’s bad for business.

"And it would also keep the inflation rate down if we don’t put prices up. It’s a bit of a no-brainer. So it’s been a tough slog to get it through. Now, I was saying earlier in the week, reading the runes, it was a better than 50% chance that the price wouldn’t go up.

"What happened yesterday that was interesting, and I don’t know what Simon’s sources are, so this may be different information, is there used to be a rule that said energy firms had to notify 30 days in advance of a price rise. That rule’s now gone, and it now says they have to notify within reasonable time, which is ill-defined, so it could be another week, it could be another two weeks that they can wait until they have to do something definitive.

"But what happened yesterday, was that that was the deadline for them telling the prepayment meter providers and the people you top up [with] the providers, what the new April rates would be. And what I have heard is that, I don’t know all of the firms, some of the firms have kept it at the current rate."

Nick: "That’s right, Simon was reporting that. And he was also saying that one of the companies had said they wouldn’t have done it unless they’d effectively been given the nod to do it."

Martin: "I’m not sure that’s correct, Nick, sorry. So, the point about it is, that for the firms, it is easier to keep it at £2,500 and increase it to £3,000 than to reverse it the other way round and have to back-pay.

"Now I’m hearing they have not been told that the rate is staying. They have been told that there is an attempt to keep the rate at £2,500. So we’re not at the smoking gun stage that this is definitely happening. But I would say we’re at an 85% likelihood that the price won’t be going up."

Nick: "Got it. Help us out here, Martin, because sometimes when these stories come out even I’m baffled... Because there's prices going up or down, there are caps, there are discounts and all the rest. Just in simple terms – if there's someone listening at home today and thinking, roughly, what's going to be happening to my bill, come April, either if there's a U-turn or if there isn't, just give us a sort of headline, would you?

Martin: "If there's no U turn, you'll pay 20% more than you do now. If there is a U-turn, you'll pay exactly the same as you do now."

For how long will the Government's Energy Price Guarantee be in place?

Nick: "And how long do you think - when you say the Government should extend its support - how long do you think they should carry on doing that for, because at some stage, you've got to get back to paying what it costs, haven't we?"

Martin: "Well, my letter was deliberately tactical asking them to postpone the rise not to cancel it. Why? Because it's an easier political ask. The Government's concern about this campaign has always been 'what if wholesale prices spike again?'.

"So I said postpone the rise until July. Now, that was deliberate because there are two levels of pricing – you have the price cap, which is set by Ofgem, the regulator, based on wholesale prices, and that sets what energy retailers can charge. And then you have the price guarantee, which is, if the price cap is too high, this is what you'll pay and the Government pays the difference.

"At the moment, the price cap, the Ofgem one, is higher than the price guarantee. So we pay the price guarantee. All the predictions are, from July onwards, the price cap will be lower than the Government's price guarantee. So we will pay the price gap, there won't be any more subsidy.

"So in practical terms, the current prediction is: in April, it'll either go up 20%, or not go up. If it hasn't gone up, then we'd still expect to see a drop of 10% to 12% from current prices from July onwards, because wholesale rates have gone down.

"There's a big time lag before we feel the benefit of wholesale rates going down because of the way the price cap system works, which is why my letter was about postponing it till July. Because after that point, frankly the energy price guarantee is unlikely to have any impact on us anyway. It no longer exists in reality, even though it's in the background until next April.

Isn't it time to move to more targeted support?

Nick: "Just a last one, quick one, if you wouldn't mind Martin. Some people would say: 'Look, give money to the poor to pay their bills, don't subsidise the bills of everyone. Because there are enormous demands on the taxpayer at the moment; pay nurses more, for example, pay more for schools and all the rest of it. Isn't it time to move to more targeted support?'"

Martin: "Well, I was one of those people who criticised the energy price guarantee because it wasn't targeted. And it helped people like me and you, Nick, who probably don't need the help compared to other people. But the problem with that is that the issue of energy is not just for the poorest. There's many on middle incomes who would struggle to pay bills, which we would have had over this winter of £4,000.

"The mechanism the Government put in place is the energy price guarantee to subsidise prices. It's not going to change that now, we do also have, to be fair to the Government, the £900 payment for those on benefits coming this winter, the money for pensioners and the money for those with disabilities.

"So, you know, I tend to work with the situation that we are in now and trying to improve that as best we can. It's not necessarily what I would have designed if I were designing the structure of how you do energy help, but I can't see any other one coming in. So we better stick with this one and work within the one we've got to make sure that many people, not just the very poorest, but many people who are really struggling get help too."

Nick: "Martin, thanks again for coming and joining us."