Money-saving expert Martin Lewis has warned many people across the UK will be forced to make the devastating choice between heating and eating this winter as energy bills rise.
Soaring wholesale gas prices are putting an upward pressure on energy bills.
The surge comes as households face a range of financial pressures, with some still reeling from wage cuts or freezes during the coronavirus pandemic and also with imminent cuts to Universal Credit and the ending of the furlough scheme.
The founder of MoneySavingExpert.com warned that some people who have previously locked into cheap fixed-price energy deals may see their bills surge by as much as 40 per cent when they come off them.
The financial guru said: “The situation is catastrophic, in a way we have never seen before.”
Regulator Ofgem regularly sets an energy price cap, which acts as a “backstop” protection for customers on default tariffs and takes into account the underlying costs to supply energy.
From October 1, the price cap will increase to £1,277.
Martin said it should be remembered that the price cap is based on typical use, so those who use more energy pay more and added that the cap was based on prices in the run-up to August.
He continued: “Prices have exploded since then, again. So the price cap will change in six months.”
The consumer champion suggested that, based on the “current run-rate”, the price cap from April 1 may potentially be as much as over £1,500 a year, based on typical usage.
He said: “As I never thought I would say, one option is prices have gone up so much the price cap is now not a bad deal for the next six months and you get six months of protection.
“But you could bide your time and cross your fingers and wait and just go onto the price cap when your current deal finishes because it cannot go up until April 1.
“The second option is to try and lock into a one or two-year fixed rate.
“Now, there are still a couple of tariffs out there where you can lock in for a year or two years at below what the price cap will be on October 1.
“They offer protection if things do not get better.
“Everybody needs to understand you will be paying more for your energy.
“This is not a question of saving money, this is a question of reducing the rise.”
Martin stressed that households need to make sure they are able to see the options available across the whole of the market when comparing energy deals.
Martin explained: “If you’ve been on a cheap fix and you’re coming off a cheap fix, you could very easily be paying 40% more on your energy bills, even if you do what I’m saying to reduce the rate going up.”
He warned: “There will be many people making the devastating choice between heating and eating.
“The [UK] Government is talking about intervening with energy companies, it needs to intervene with consumers as well.”
There are also fears that more small energy suppliers could go bust.
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According to Ofgem’s website, in situations where an energy firm does go bust, it will protect any credit balance customers have, as well as their supply.
An Ofgem spokesperson said: “We know that the current situation with high wholesale energy prices is putting pressure on customers and energy companies. This is a global issue. We have the systems and processes in place to ensure that customer needs are always met.
“For those customers who are with energy companies that can no longer trade, a new supplier will be appointed. Ofgem is working closely with the UK Government to manage the wider implications of the global gas price increase.”
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