Ahead of tomorrow’s energy price hike (1 April), Martin Lewis has outlined three tips for people who pay for their energy bills by monthly direct debit.
Tomorrow, the energy price cap is due to rise by an average of 54%. If you have never switched supplier or you were on a cheap fix that has now ended, your energy bills are governed by the price cap. You’re also on the price cap if your previous supplier went bust and you have moved supplier as a result.
If any of those scenarios apply to you, then make sure you read the following tips before the price hike takes effect.
1. Take a meter reading
On 31 March (today), you should take a meter reading and submit it to your energy supplier. This way, you can make sure that all the energy you’ve used is charged at the cheaper rate.
Some people have asked Martin Lewis whether they should slightly inflate their readings to take advantage of cheaper rates. However, he has correctly pointed out that this would be considered fraud.
2. Think carefully before ditching direct debit
With the colossal price hike coming tomorrow, some people are considering cancelling their direct debit. But, as Martin Lewis points out, although this will provide you with greater control over your bills in the short term, this move will cost you more money in the longer term.
If you’re on typical usage and pay by direct debit, the price cap from 1 April is £1,971 per year. If you pay by pre-payment, it’s £2,017 per year. Of course, you’d need a pre-payment meter to pay this way.
If you decide you want to cancel your direct debit and pay your bills quarterly, then the price cap is £2,100. That means you’ll pay around 6% more for your energy than if you stuck with a direct debit.
So, if you’re thinking about ditching direct debit, keep in mind that it’s cheaper to pay this way than it is to pay quarterly.
3. Avoid switching for now
From 1 April until the end of September, you’ll pay £1,971 per year for your energy if your bills are governed by the price cap. However, based on what we’ve seen so far, the current prediction is that the price cap will rise to around £2,500 on 1 October.
Of course, estimates can change and we’re only two months into the six-month assessment period. However, Martin Lewis believes it’s “very unlikely” that October’s price cap will be lower than the April price cap because wholesale prices are currently so high.
Based on these figures, Martin Lewis believes it’s only worth considering switching if you can find a deal that’s no more than 18% to 20% higher than April’s price cap. However, he says this is a “best guess”.
Sadly, for new customers, the best energy deals from the country’s best energy suppliers are around 40% higher than April’s cap. As a result, as things stand at the moment, it is not worth running an energy comparison and switching supplier. Instead, you’re better off staying on the April price cap and seeing how things change in the coming months.