Shopping around is normally the best option if you want the best deals, but the rising cost of energy means it makes more sense to just go onto a variable rate when your current contract ends
Consumer expert Martin Lewis says consumers who want cheaper energy deals shouldn’t shop around like normal- but should “do nothing” instead.
Speaking live on the ITV Money Show on Thursday, Lewis said the best thing to do is pick deals that match their energy providers’ price cap – or wait until they fall onto one when their current deal ends.
This cap limits the amount firms can charge the average customer on their default gas and electricity tariffs – usually variable-rate deals.
In the past, the cheapest energy deals were normally fixed rate deals , not variable rate ones – which many consumers ended up on by default when their contract expired.
But now the rising cost of energy has turned normal advice on its head, Lewis said.
Rather than look around for the cheapest energy tariffs, almost everyone is better off ending up on their energy provider’s variable rate deal.
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British homes are currently paying high prices for energy due to the soaring cost of gas – which Lewis says currently costs five times its normal amount.
But providers can’t pass all of that cost on to consumers due to the cap. Since October 1 this has been £1,277 a year for normal energy use.
“There is no maximum limit on how much you can pay,” Lewis warned. “If you use more, you pay more.”
This has led to many energy providers stopping trading .
The price cap of £1,277 is due to rise to £1,660 next April, Lewis warned.
“The latest estimate is that on April 1 the price cap will rise by 30% based on the current run rate, to £1,660 a year on typical use,” he said. “That means around a £500 increase compared to a year before.
“A year ago you could lock in, on typical use, for around £800 a year. If you come off that deal now you go automatically to the price cap at £1,277, a 50% cost increase.
“That’s horrible. But if you go to the cheapest fix on the market now it’s £1,700 a year – over double your cost.”
Picking a deal subject to the price cap is basically like picking a fixed rate deal – as consumers know it cannot rise past £1,277 a year.
“I would think of the price cap as a six-month fix – it’s the cheapest deal on the market,” he advised.
Around 50% of homes are on variable energy tariffs, Lewis said.
“From the guy that’s been telling you to switch for years – just do nothing,” he said.
“If you want to go on a comparison site, I wouldn’t stop you. But for the vast majority of people the advice is the same – do nothing.”