The finance guru has spoken to Energy Secretary Ed Miliband this weekend
Personal finance guru Martin Lewis has warned that gas and electricity bills are a ‘potential ticking time bomb’ after he spoke to Energy Secretary Ed Miliband this weekend. Energy bills will drop next month thanks to Government intervention and an announcement by the regulator Ofgem – but there are fears they could soon surge again as the war in Iran threatens fuel supplies.
The Money Saving Expert founder and TV finance expert says he was called by Ed Millband on Saturday and discussed a number of potential problems.
Martin said energy bills are now ‘a potential ticking cost time-bomb’. He said: “ Most bills are protected from the spike in wholesale energy prices as the Energy Price Cap is set based on a significant time-lag. In fact it is locked in to drop 6.7% in April.
“Those not on the Price Cap are mainly on existing fixes (which, due to unprecedented prior policy changes, will see most suppliers cut existing fix rates on April 1, typically by 7% to 9%) so are also price protected for now.
“One current concern is the lack of availability of cheap fixes. While that’s frustrating, in the short term it means those whose existing fixes are ending, will just (hopefully temporarily) need to move on to the Price Cap. There are also a minority of homes who are immediately affected, eg, those on time-of-use tariffs.
“These include Octopus Agile & Tracker, which move half-hourly or daily with wholesale rates. These are sophisticated user tariffs, and if necessary, people have the short-term option to switch back to a Price Cap tariff (though do check for restrictions on how long before you can switch back).
“So while none of that is great, it isn’t crisis point. The end of May is likely crunch time: This is usually when the next Price Cap (July to Sept) is announced. It currently seems very likely it will rise, though just how much all depends on how long-lived the current energy price spike is. “
With energy use typically much lower in summer – as people don’t need to heat their homes. Martin said the next point to look at making a change could be October, adding: “If wholesale rates have dropped by then, the big push should be to get people off the Price Cap and onto fixes which could possibly look to be 20%+ cheaper, avoiding any price hike. That should then leave only those unwilling or unable to switch paying more – the latter is an issue the government would need to concern itself with at that point.
“Yet if rates haven’t dropped back down by May, and it looks like it’ll stay high so the October Price Cap will rise too, and no cheap fixes are available, then things get into real problem territory. The government needs to be (and I suspect is starting to) planning now for that eventuality in case more hard-core intervention is needed.”
The conflict in Iran has seen shipping in the Strait of Hormuz, which links the Gulf to the Arabian Sea, “significantly” reduced due to attacks. About a fifth of all global oil and LNG (liquefied natural gas) passes through the strait.
Speaking in the House of Commons this week, Ed Miliband told MPs he is confident we can maintain a supply of fuel, adding: “I’ve been in touch with National Gas and Neso (National Energy System Operator), who are confident about our security of supply (of gas).
“On oil, we hold substantial emergency commercial stocks and stand ready to work with the International Energy Agency to support the stability of oil markets if needed.”
He said the consumer energy price cap, which is paid by households, is fixed until the start of July. Prices are set to fall by 7% from April 1.
Mr Miliband said: “The opposition failed to learn the lessons from the Ukraine crisis, which caused the worst cost-of-living crisis in memory, and I warned that a dogma of opposing clean energy would damage this country and risk families and businesses being left to pick up the bill.
“The events of recent days have unfortunately shown why this would be such a dangerous and reckless strategy, and we will continue to reject it.”
Chairman of the energy security and net zero committee Bill Esterson has called for the reformed national pricing consultation, which is currently taking place, to be brought forward “so that bill-payers can benefit from the availability of low demand cheap electricity as soon as possible, as an immediate response to this crisis”.
Mr Miliband told the MP “there is intensive work underway to look at all the options that we have”.
