Martin Lewis issues 'grim' warning over 'sickeningly costly' energy deals

Martin Lewis has issued a “grim” warning that some fixed energy deals that appear “sickeningly" expensive might now be the best available prices.

According to the latest forecasts from consultancy Cornwall Insight, the energy price cap will remain higher than £3,300 from October to at least the start of 2024.

Lewis wrote on his MoneySavingExpert website: “The UK energy market is broken. The theory is we're meant to gain from competition, but there hasn't been any – instead we have effectively regulatory-enforced high prices.

“Yet there are opportunities to take action to help, not because there are great deals out there, but because the latest analysis is the future looks even WORSE, with the prediction for the next price cap continuing to rise, so it's now far higher than even a couple of months ago.

“This means some sickeningly costly fixes look like they may now be winners.”

Watch: Energy price cap to remain above £3,500 through most of 2023, report warns

What is the energy price cap?

The price cap on energy bills regulates what customers on default, or standard variable tariffs pay per unit of energy used, and applies to 24million households in Britain.

Regulator Ofgem sets the limit on what energy firms charge.

Variable tariffs have previously been more expensive than fixed-rate deals and people are often on these tariffs if they have never switched suppliers, a fixed term has ended or their supplier has gone bust.

There is also a separate price cap for customers on prepayment meters.

On a standard energy bill, the price cap will govern the maximum standing charge and price per kWh of gas and electricity that your supplier can charge you.

Read more: UK on brink of recession, warns think tank

How high is it predicted to go?

Household energy bills will likely remain at more than two-and-a-half times their pre-crisis levels until at least 2024.

Energy consultancy Cornwall Insight said bills will hit a staggering £3,359 per year from October for the average household, and not fall below that level until at least the end of next year.

The price cap will hit £3,616 in January and rise further to £3,729 from April.

It will begin to fall after that, but only slowly, reaching £3,569 in July before hitting £3,470 for the last three months of 2023.

The latest price cap predictions are hundreds of pounds above previous forecasts from Cornwall Insight.

Read more: BP boss gives £400 rebate to charity after company's £6.9 billion profits

What is MSE's key advice?

Lewis said there are no tariffs that are meaningfully cheaper than current deals, but some would be cheaper than the predicted October prices.

He wrote if the predictions are correct, people will pay on average 72% more over the next year.

Lewis wrote: “If you're offered a year's fix at no more than 70% above your current price-capped tariff, or 75% more if you very strongly value budgeting certainty, it's worth considering.”

He added usually the only fixes worth taking up were for existing customers, but these were not required to be publicised.

Lewis advised the best way of finding these deals was to contact your energy firm and suggested Utility Warehouse and E.on could be worth considering.

He warned there were risks with taking a fixed deal as a new prime minister would be elected on 5 September and they may offer further assistance to struggling households.

He said any moves made by the government would be unlikely to reduce the price cap but there was an “outside chance” they would and this would not help those on a fixed deal.

Lewis said there was also a risk energy firms went bust and you ended up back on the price cap after paying more now.