URGENT Energy price cap update: everything you need to know to beat the increase!

With Ofgem announcing the energy price cap will rise by 4% in October, Martin Lewis has recorded a special urgent podcast to tell you everything you need to know to beat the price hike and save on your energy bills.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  This BBC podcast is supported by ads outside the UK.

• 0:06Speaker 01

  Cheers to fall savings at Whole Foods Market, home of higher ingredient standards. This Halloween, share chocolates and candies made without that spooky high fructose corn syrup. Throwing a party? Make it easy with a berry chantilly cake. Ready to cook pizza? No antibiotics ever chicken wings. And sushi made fresh daily. Fall gatherings never tasted better. Save through November 3rd at Whole Foods Market.

• 0:33Speaker 00

  Sometimes we all need an extra helping hand, especially with a tricky business problem you've been putting off. Claude is the AI for just that. It's the collaborator that understands your entire workflow and thinks with you, not for you. And Claude isn't just for quick questions. Hand it a whole task, like turning a folder of scattered notes into a report, and it does the work and hands back something finished that you can open and edit. Claude can now draft a doc or deck right in front of you, and Claude Design now lives right inside Claude. Describe the website or prototype you're picturing, attach your design system, and it comes back in your own design language, ready to edit right on the canvas. It works with your files and the tools you already use, like Gmail and Slack.

• 1:18Speaker 00

  And whether you're debugging code at midnight, building a financial model, or strategizing your next business move, Claude extends your thinking to tackle the problems that matter. For problems worth solving, get started with Claude at claude.ai/solve. That's claude.ai/solve. And check out Claude Pro, which includes access to all of the features mentioned in today's episode. Claude.ai/solve.

• 2:03Martin Lewis?

  Hello and welcome to this special mini breaking news edition of the Martin Lewis podcast. On the back of the announcement from the energy regulator Ofgem that the energy price cap will rise yet again on the 1st of October. In a moment, I'll play you the interview I did reacting to the news on Five Live, where I go through the big picture of what to look at. But before we get to that, I want to give you podcast listeners a little bit more granular detail of what's really happening. So, the headline figure is the price cap on the 1st of October that dictates the price that those people in England, Scotland and Wales on standard tariffs pay is to rise by 3.6%.

• 2:45Martin Lewis?

  The main reason for that rise is wholesale rates. The October price cap is based on average wholesale rates for the period from the middle of March to the middle of August, and they have been high due to the Middle East conflict. But there's another factor in here that is on the 1st of October, the same date the new price cap starts. The government has also scrapped VAT on domestic electricity, only electricity, not gas. And that will only last six months. So those two things have to come together. Now, those people who aren't on price caps, such as those who are on fixes, you're going to see that electricity VAT cut on the 1st of October. Your bill's probably going to be on average around 2.5, 2.6% less than it is right now.

• 3:30Martin Lewis?

  Because remember, it's only electricity and you might have some gas going in your energy bills. But I want to talk to you about the cumulative effect of all of that on the price cap. The headline figure is 3.6%. Here's what's really happening. The average domestic UK price cap rate for those on direct debit, and it does depend what region you're in, and it does depend how you pay. But let me just give you this idea. The new electricity unit rate is 26.3 pence per kilowatt hour. So that's up just under 1%. The new electricity standing charge on average is 54.8 pence per day. That's down 4.1%. Now, the reason those aren't going up that much is because of that VAT cut and the standing charge is coming down.

• 4:13Martin Lewis?

  So if you are an electricity-only user, then you're likely to either see a small rise, or if you're a very low user, you could actually see a slight fall coming in October. The gas unit rate, though, is where the really big hike is coming on board. The new gas unit rate on average is 7.97 pence per kilowatt hour. That's up nearly 9%. And the gas standing charge is 29.68 pence per day. That's up 2.2%. So if you use a lot of gas, you are likely to see a big rise and probably bigger than the headline 3.6% average rise that's coming out.

• 4:56Martin Lewis?

  Now, having given you that little bit of nitty gritty nerdy stuff for the podcast, I think it's probably time we go into the Five Live interview that I did with Rachel Burden not long after the new price cap was announced.

• 5:07Speaker 03

  Right, it is Five Live breakfast. And the other big news domestically today is that the energy regulator Ofgem has announced that its price cap is going up in October. We were expecting this, reaching a three-year high. The limit which applies to households in England, Scotland and Wales, which are not on fixed tariffs, will see typical bills increase by £60 a year. So let's talk now to Martin Lewis, founder of money-saving expert and of course, host of Five Live's Martin Lewis podcast. How are you this morning, Martin? We were expecting this figure, won't we? But it doesn't mean to say it won't still hit some people hard.

• 5:38Martin Lewis?

  No, I think it's the really big thing to remember is we were on in July, we got the announcement of a 12.6% rise in the price cap. At the time, the mitigation was, that was over the low use summer period. Well, this 3.6% rise that we're seeing today is on top of the 12.6%, which means prices are nearly 17% higher once we get to the 1st of October for those on the price cap than they were back in April. And now we're going into the winter period. And if you want to be really depressing, because wholesale rates, those that gas and electricity companies pay, are so high right now. In fact, this week, they're higher than they've been at any point since the middle of the Ukraine crisis.

• 6:19Martin Lewis?

  The current prediction is we're looking at around a 10% rise again in January, which is why people do need to act. Sorry, Rachel, you know, I always, I always become a nerd and pick you up on these things. Forgive me.

• 6:30Speaker 03

  Nerd away. Go on.

• 6:32Martin Lewis?

  That £60 a year figure the BBC is quoting is just absolutely nonsense.

• 6:37Speaker 03

  Okay.

• 6:38Martin Lewis?

  This is a three-month price cap. You can't have an annual rise on the three-month price cap. Price cap only lasts till December. It is a, I mean, if you want to be technical, on an annualized rate, it would go up £60. But as it's only a three-month period, that's equivalent to a £15 pro rata. But it's actually 30% of annual usage, so it's more like £20 over the period. But none of, none of that matters. What matters is it's, it was meant to be coming down now. We were meant to get the short spike in July on the back of the Middle East. That was hopefully going to be over by now. It hasn't. This is 3.6% on top of 12.6%. And that 3.6% is after the cut, the scrapping of electricity VAT that also happens on the 1st of October.

• 7:21Martin Lewis?

  Without that, it would be going up 6% today. So people need to take note. They need to know whether they're affected or not. As you rightly say, it doesn't affect those on fixes, although most people on special tariffs. This is only for those people who are on the standard variable tariff of their firm. The do-nothing tariff, the I didn't fix, the I fix, or my special tariff ended and I did nothing. This hits you, and if it does hit you, there are ways to avoid it, but you need to act.

• 7:51Speaker 03

  Okay. And how do you act? What's the best thing to do?

• 7:54Martin Lewis?

  Well, so we'll, let's just go through that pattern that I talked about. The cheapest fixes on the market are currently around 7% less than the current cap. So if you were to fix today, then you would save, on the cheapest fix on the market, you would save 7%. That cap is going up 3.6% in October. So the cheapest fix today, which of course locks in your unit rates and standing charges, well, that is going to be 10% less than the October cap. And if, and though it is crystal ball gazing, the price goes up again in January by, let's say, 10%, fixing today is 20% cheaper than what you will pay in January. So the, the most straightforward thing for people to do

• 8:40Martin Lewis?

  is to go onto a whole of market comparison site, one that doesn't hide tariffs that don't pay it, and go and find your cheapest fix. Not your energy firm's cheapest fix, because that probably won't be cheap. The cheapest fix on the market and lock in. The only complexity to that is the rate at which cheap fixes are set moves with wholesale rates. And you heard me say earlier, this week, they're the highest they've been since Ukraine. So these fixes are more expensive than they were two, three, four weeks ago, and far more expensive than they were a couple of months ago.

• 9:12Speaker 03

  So do they behave more like a tracker mortgage then? Is that what you're saying?

• 9:16Martin Lewis?

  No, it's more complex than that. It's the rate that you can fix at. So you lock in a rate, but if you had fixed a month ago, you could have locked in at 10% less than the current price cap.

• 9:28Speaker 03

  Sure.

• 9:28Martin Lewis?

  Today, you can only lock in at 7% less than the current price cap. And then that rate stays for the next year. Do you see what I mean?

• 9:34Speaker 03

  Yeah.

• 9:34Martin Lewis?

  So it's, it's the rate of new fixes we're talking about, not the rate, once you're fixed, you're fixed.

• 9:40Speaker 03

  Yeah.

• 9:40Martin Lewis?

  So my problem is, if the Middle East conflict were to lessen over the next few weeks, you may be able to fix more cheaply in three or four weeks' time than you can today. But of course, I don't know that because that is dictated by the big orange fella over in the White House. And who knows what he's going to do or not going to do.

• 9:57Speaker 03

  Yeah. And we know that a lot of this is baked in anyway, that the rise is, it will take a long time for, for any reductions to filter, to filter through. But that actually, I'm sorry.

• 10:06Martin Lewis?

  On fixes, you'd probably see it come down. I think I could certainly see it going a few percentage cheaper.

• 10:11Speaker 03

  Okay.

• 10:12Martin Lewis?

  But the big message from me, I think I'm going to, if I can split people into two categories. If you're a, I haven't done anything for a couple of years because I don't understand this type, just go and get the cheapest fix you can today. That's it. If you're a, I normally fix, my fix is coming to an end, I understand how this works, then you might want to wait a couple of weeks and cross your fingers that things get better if you understand the risks that are involved in doing so, that it might also get worse.

• 10:36Speaker 03

  Martin, so I do want to speak up for the heating oil people. Stephen Halsted says, yeah, what happened? It's still double the price. We were promised 150 quid. It's not looking good for us. Anything to say on that?

• 10:49Martin Lewis?

  So the energy price cap is time lagged. What's happening in October is dictated by average prices between the middle of May to the middle of August. They were bad. What's happening now is worse. That's why things are getting worse. Heating oil is much more time sensitive. So the fact that the wholesale rates have gone up now means that people who have heating oil are paying even more. I sent a massive dossier to the government on this at the start of the Middle East crisis. The biggest thing I said is we need this to be regulated so there are fairness rules in place. That hasn't happened. I'm afraid at this point, it isn't a question for a money saving expert. It's a question for a Secretary of State for Energy. What are they going to do? Because there are still no protections in place. The small amount of help that was put in has gone and many people found it difficult

• 11:34Martin Lewis?

  to be able to access it. And there are massive problems for people on heating oil.

• 11:38Speaker 04

  All right.

• 11:38Martin Lewis?

  But there are no, you know.

• 11:39Speaker 04

  We're out of time.

• 11:40Martin Lewis?

  Solutions, I'm afraid.

• 11:41Speaker 04

  Martin, thank you very much.

• 11:43Martin Lewis?

  Okay, so that's the interview with Five Live. And I went through there, as you can hear, the easy, simple solution that is fixing. Of course, things are always more complicated than that. And as you'd heard, I was talking about, and it's probably worth explaining my logic here. Here's my problem. And here's the reason I gave the caveat about fixing right now. The problem I have, the big picture, fixing is better than staying on the price cap. On the huge balance of probabilities, if you lock in a cheap fix right now, you will save compared to being on the price cap over the next year. That's because we know fixing now is cheaper than the current price cap. We know the cheap fixes now are far cheaper than the October price cap.

• 12:26Martin Lewis?

  We think it's very likely fixing now will be cheaper than the January price cap because we would need an enormous shift that we've already one week into the three month assessment period for that price cap and prices are huge. So for it to turn around so that prices were actually dropping by the 10% they'd need to drop in January before it wasn't worth fixing now, I mean, is virtually unthinkable. We'd need a major shake up of world economic news. It's not impossible, but it's virtually unthinkable. So we're pretty sure that fixing now will save you until the end of March. Then we don't know what's happening in March, but March is a lower use period. And if you fix now, you'd save over the high use winter period. So the standard logic, you can see why I'm saying for those people who do nothing, they should fix. You can see why that's what I said in the interview.

• 13:10Martin Lewis?

  But here's my problem. And I think it's worth just me talking you through that. As you heard me trying to explain there, fixed prices are volatile, not once you fix, but the prices of new fixes, they're volatile, they move every day. And they're incredibly time sensitive and price sensitive to current wholesale rates. So if I look at the rate you can fix at now, that's the most expensive you've been able to fix at for probably the last two or three years. I mean, all fixes in the past have been cheaper than current fixes. So it's, I find it slightly sticks in the craw for me to be suggesting people fix at a relatively high rate. But I don't know if that rate will come down because the main thing dictating the rate

• 13:51Martin Lewis?

  you can fix at are world wholesale prices, which are currently being dictated by what's going on in the Middle East. So, you know, we could be, it could be that today is a peak of fixed prices if things settle down. And in a month, in a month's time, you'll save, you'll be able to fix at 10, 11% cheaper than the current price cap rather than 7%. So I have to throw that caveat in, which is why I've got mixed messaging. My message for, you know, the simple thing is just get your fix now and do it while you can. But the more complex thing is there is a market out there in fixed prices and that is volatile and it does move. What I don't want is people to say to me, you told me to fix four weeks ago and it's got even cheaper since. And if I'd waited, I could have fixed. Yes, that may happen equally. You know, fixes could get even more expensive than they are right now.

• 14:35Martin Lewis?

  And that's the problem that I've got. And that's why even when trying to do a sort of more simple newsy piece on Radio Five, I felt it was important to give the caveat about what could happen to fixed prices. Now, there are other caveats out there, things that I didn't mention too. You know, if you're a very low user, British Gas has a cap tracker that matches the price cap so it'll still go up, but not 60 quid off standing charges. And EDF has a similar one available at the same rate, at slightly less rate. So there are other options. There are of course those hugely volatile time of use tariffs, Agile and Tracker from Optopus. They're not looking good at the moment, but if things improve, they could look far cheaper than fixing. And if you've got an EV, there are specialist electric vehicle tariffs. I've talked about this in past pods and you'll be able to find good information online about

• 15:19Martin Lewis?

  what the best EV tariffs are. I can't tell you where to go, you'll understand why, but I think you'll, you'll get a gist of what you could look up. And there are also special charges if you're on solar too. But fixing is the simple option for most people. Anyway, that's me just digressing and going into my own world of trying to explain to you in this intimate little world of the podcast, exactly why I have to caveat in the way I do when I'm doing a news interview and what's going on with fixes. I hope this gives you what you need. I may well come back and do a proper energy, exactly what's happening, full podcast programme next week when I do it with Adrian and we do a proper podcast and get all your questions in. Haven't fully decided on that yet, but I hope you found this quick newsy pod interesting and helpful. Until next time.

• 16:19Speaker 04

  Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing [email protected]. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

• 16:55Speaker 05

  Sometimes we all need an extra help in hand, especially with the tricky business problem you've been putting off. Claude is an AI for just that. It's a collaborator that understands your entire workflow and thinks with you, not for you. And Claude isn't just for quick questions. Hand it a whole task like turning a folder of scattered notes into a report and it does the work and hands back something finished that you can open and edit. Claude can now draft a doc or deck right in front of you and Claude Design now lives right inside Claude. Describe the website or prototype your picturing, attach your design system and it comes back in your own design language, ready to edit right on the canvas. It works with your files and the tools you already use, like Gmail and Slack.

• 17:39Speaker 05

  And whether you're debugging code at midnight, building a financial model or strategising your next business move, Claude extends your thinking to tackle the problems that matter for problems worth solving. Get started with Claude at claude.ai/solve. That's claude.ai/solve. And check out Claude Pro, which includes access to all of the features mentioned in today's episode. Claude.ai/solve.

• 18:04Speaker 04

  This week on The Interface, millions of kids have grown up on camera with their childhoods turned into content. There's a new law in California that gives influencers the right to be forgotten and it could impact adults too.

• 18:15Martin Lewis?

  And an attack on Russian data centre started a rumour that all the evil disinformation bots had been deleted from the internet. But the truth might actually be a lot scarier.

• 18:26Speaker 04

  For our take, join me, Jess Maddox.

• 18:29Martin Lewis?

  And me, Thomas Germain for The Interface.

• 18:31Speaker 04

  Listen on BBC.com or wherever you get your podcasts.