Archive: MoneySavingExpert's Money Tips Email

Finally the Government and the news has caught up with what we've been telling you for months. Just a fortnight ago here, I warned you the energy market was dire. Now, sadly, it's got far worse:

- Cheapest fixes are 60% costlier than a year ago.
- 4 energy suppliers have gone bust, more to come.
- Wholesale gas prices (those energy firms pay) UP fourfold in a year.
- As much UK electricity is gas-powered, electricity prices are hit too.

While others focus on the 'why', my aim's to look at the impact on you and how to mitigate it. To see how your choices stack up, use our MSE energy comparison in conjunction with the nine need-to-knows below.

PS: As my ITV series restarts on Thu at 8.30pm, I'll be taking you through it step-by-step there too, if you prefer to watch rather than to read.

1. On 1 Oct the energy price cap - that over half of all homes are on - will jump 12% to £1,277/yr (on typical use)

If you've never switched, or have come off a fixed or special tariff, you're likely on your energy provider's default standard tariff. That price is dictated by regulator Ofgem's so-called price cap (except in Northern Ireland). In fact, it isn't a cap on price, it's more a cap on the rate you pay per unit, so if you use more, you'll pay more. See price cap FAQs.

- The cap rises an average 12% (13% for those on prepay meters).
- For someone with 'typical use', that's up from £1,138/yr to £1,277/yr.
- All big firms' standard tariffs are within £1 of the cap.

2. From 1 Apr next year, the price cap could jump again to a stomach-churning £1,450/yr (on typical use)

The price cap changes each October and April. Yet the assessment period that dictates it is far earlier. The new 1 Oct cap is based on average wholesale prices for the six months until the end of July. Yet... the wholesale price has exploded since then.

As it's sensible to look at energy bills over a year, the fact we're nearly a third through the next assessment period (Aug - Jan), which determines the cap from Apr 2022, is crucial. At current rates, analysts at Cornwall Insight predict ANOTHER 14% jump then, taking it to £1,455/yr (on typical bills).

In fact, for prices not to rise in April, wholesale rates for the final four months of the assessment period would need to drop to roughly the lows of the pandemic. Yet many analysts think they're staying high for now.

3. Rolling off a cheap deal? Accept the fact you WILL pay substantially more

Prepare to be horrified - today's cheapest fixes are 60% more than a year ago. The idea of 'saving' compared to what you were paying has gone for now. So like others...

4. The BIG CHOICE you have to make...

Whether you're on the price cap or rolling off a fix, the options are pretty stark. You can see YOUR actual cost of various options via a Cheap Energy Club comparison, but to give an indication:

MSE UPDATE 3PM THUR. The cheapest variable and fixes above have been pulled.The cheapest variable on typical use is now £1,271/yr. The cheapest 1yr fix is now a typical £1,561/yr, while the cheapest 2yr fix is £1,477/yr. 

• Option 1: Do nowt for now and stick on a price-capped / variable tariff. Best if wholesale prices drop in a few months. Energy firms are complaining the new 1 Oct price cap is lower than their cost price. So for consumers the price cap is protective right now, but it's likely to be destructive come next April. 
  
  Currently, the cap works like a six-month 'cheap' fixed rate, so you could stick with it (I can't believe I just wrote that - wow) hoping that by April wholesale prices will drop, cheaper fixes will be available, and you can lock in then.
  
  The risk is that if you're still on it by April, and either the cheapest fixes then are more than now, or other prices have dropped and you haven't switched, you'll be massively overpaying.
  
  Tip to shave a little off. One bigger supplier, Octopus (link takes you to a comparison), has a variable rate up to £50/yr cheaper (on typical use) than the new price cap. Crucially, it still must follow the price cap, so even if - as I suspect it may - it puts prices up, it can't go above it. This may shave down costs in the short run.
  MSE UPDATE 9AM THU: Octopus is no longer allowing new customers to sign up to its variable tariff.
  
  
• Option 2: Grab the cheapest fix possible. Best if wholesale prices continue to rise - or if you need certainty. A fix means you lock in the rate for a year or two. Use the MSE cheapest fixed comparison to find your winner, as it depends on location and use. (New to switching? See the Switching FAQs.)
  
  The last fix cheaper than the new price cap was pulled at lunchtime on Tuesday. So you will have to pay more than the cap to fix. Yet if the April cap rises sharply and wholesale prices continue to stay high, this could be welcome peace of mind, and a saving with hindsight.
  
  

Without a crystal ball, I can't with certainty tell you which will be best. So you have to decide based on your attitude to price versus certainty.

5. My cheap fix lasts a few more months, should I ditch it and grab a longer one?

My best guess is no. Prices have risen so much that the savings you'll make by sticking with your old cheap tariff, while it lasts, will be huge (though do compare to check). So even if prices still rise, I suspect the gain of holding on to very cheap tariffs now will likely outweigh that. It is more art than science though.

6. Small providers are going bust, should I avoid them?

Four suppliers covering 500,000 homes have gone under in the last fortnight. Read our People's Energy & Utility Point help (also useful to see the protections in place if you're worried about your firm) and PFP & MoneyPlus help. And certainly many more suppliers are at risk.

The Govt has said it won't bail them out, saying that it is normal to see some firms fall by the wayside. Yet some business experts predict if nowt changes about 30 more may go, leaving only 10 - far from normal. It's not just about tiddler firms either, even some with well over a million customers have reported funding issues.

Yet predicting which'll go and when is tough, because as soon as a firm knows it's insolvent it must declare it, so there's little pre-warning.

If your supplier does go bust, the Ofgem safety net means you won't lose supply, you'll be moved to a new firm, and your credit is protected. The risk is one of delay, hassle and losing any cheap tariff you're on, instead being moved to the price cap.

However, this is all a bit of a moot point for switchers right now, as there's nothing cheaper than the cap and most cheap fixes are with bigger firms.

MSE UPDATE 3PM WED. Avro Energy & Green have now ceased trading, affecting more than 800,000 households between them. They are the fifth and sixth energy providers to go under this month alone.

7. Beware other comparison sites that don't automatically show deals that don't pay them... and most of the cheapest don't pay right now

Energy switching sites, including our Cheap Energy Club, earn their money by getting paid by firms they can process a switch for. To protect their incomes, most sites usually by default don't show deals they don't have a commercial relationship with. 

I've always rejected that for MSE. By default, the Cheap Energy Club comparison includes all available tariffs (though you can filter, for example, for service rating).

Instead, my concept was to give switchers nearly half of what we earn in the form of cashback (eg, £25 per dual-fuel switch) allowing us to include the cashback in the saving, so more people switch to those that pay. A win-win for us and you. 

Right now, in these extraordinary times, many of the cheapest firms have pulled payments to comparison sites, so most sites, by default, show very few tariffs. It's so extreme that some comparison sites are now more prominently signposting how to opt to see the whole market.

As we're always whole of market by default, we've not changed, though it does mean we're unable to switch you to most tariffs, and instead just link you to the provider.

Similar is true of free auto-switch sites, which are likely to have even fewer competitive deals than usual right now.

8. Struggling to pay bills, and worried you need choose between heating and eating? There may be help available...

I am very concerned about how those on lower incomes will cope with these horrific new energy prices, especially coupled with high inflation, the end of the universal credit uplift and furlough & self-employment support ending. It is the perfect price storm.

Emergency measures put in place due to coronavirus are still ongoing. Your supply won't be cut off - disconnections have been suspended, while prepayment customers can get emergency credit to ensure the lights stay on.

Suppliers can also offer payment reviews, breaks or reductions. This is all case-by-case, so contact your firm as soon as you can if you start to struggle, and let it know if you're vulnerable.

Those on lower incomes may also be able to apply for £140 towards bills via the 2021/22 Warm Home Discount. Though that rate hasn't increased for seven years, even though cheap fixes are up by 60% compared to a year ago. I try to stay away from getting too political here, but pressure is needed on the Govt to increase this ASAP.

More help in our Home & energy grants guide.

9. It's not just about prices - use less and you pay less - obvs. Ensure you know the energy-saving myths from reality

Most people (including me sometimes) waste energy. We know wearing jumpers, lowering thermostats and not leaving electricals on standby will help. And maybe these price hikes may change behaviour.

There are also many questions out there, such as 'should you keep the heating on all day, or only have it on when needed?' For answers, see our 18 Energy Mythbusters guide, and also the top thrifty heat-saving tips for things like how to easily make draft excluders.