You could save more than £100 per year by making sure you aren’t on a standard energy tariff when it increases later this year, according to Money Saving Expert founder, Martin Lewis.
The energy regulator Ofgem is raising the price cap on default and standard tariffs in the UK, which are typically among the most expensive, and will generally be the tariff you’re on if you haven’t switched suppliers recently.
The hike means that the average household will see their bills rise by £96 per year from 1 April 2021. This increase could amount to even more for some households, as the cap places a maximum unit price for gas and electricity, but you’ll still pay more or less overall depending on how much you use.
‘A fair price isn’t always a good one’
Speaking on the Martin Lewis Money Show, Mr Lewis said: "Many will be shocked by the price cap rising £96 per year on a typical bill - the silver lining is that it will hopefully shock some people into action.
"The cap may be a ‘fair’ price, but it is far from a good one. Over the last few years, it has been on average at least £200 a year more than the cheapest tariffs for switchers.
“This rise is really reverting it back to form - it was only artificially low until now on the back of the huge reduction in world energy prices, due to the early days of the pandemic.
Mr Lewis explained that energy cost comparison sites won’t currently be factoring in the scheduled tariff rise, meaning that the savings made by shifting from a standard tariff will likely be a lot more than comparison sites currently show
He added: "So while I’d strongly urge everyone on a standard tariff to compare and find their cheapest supplier, don’t be put off by the relatively small saving shown. In reality it's likely to be much bigger."
"I'd always use a whole-of-market comparison, as the cost is based on where you live and how much you use."
Why is the tariff going up?
According to Ofgem, the energy tariff will rise to reflect the recovery of demand since the first lockdown, when energy usage fell considerably compared to normal demand.
Ofgem chief executive Jonathan Brearley said: "Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic. We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.
"The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal."