The energy price cap will come down in April (Image: Getty)
Martin Lewis has revealed how households paying energy bills can pocket £200 in savings. The money-saving expert discussed utility costs ahead of the price cap adjustment on April 1.
Energy regulator Ofgem confirmed on February 25 that the energy price cap would drop by 7 per cent for the period spanning April 1 to June 30, 2026. This adjustment translates to a cut of approximately £10 monthly for the typical household consuming both electricity and gas.
Notably, Mr Lewis – while speaking on his BBC podcast – suggested that now presents the ideal moment to ‘get off the price cap’. He indicated there was an even more straightforward approach to obtaining lower energy bills.
The price cap represents the default tariff imposed when a customer isn’t on a fixed-rate deal. It establishes a maximum rate per unit and standing charge that can be levied on customers for their energy consumption.
How to get lower than the price cap
Mr Lewis said: “Something strange is happening to energy bills on the 1st of April. All bills are going to get cheaper, which means this is the perfect time to get off the energy price cap.
“Why do I say that? Well, I’m going to take the simplest solution which is fixing, where you lock in a rate for a year. Currently, this is the rate of the energy price cap, and the cheapest fixes are 14 per cent cheaper. On the 1st of April, the energy price cap – which is the default bog-standard tariff you’re on if you’ve never switched or you came off a fix and didn’t do anything – is going to drop by an average 6.7 per cent.
“But all tariffs are going to drop too, and fixes are going to drop by, well, potentially 7 per cent to 9 per cent depending on your usage. So, whilst the cheapest fix is currently 14 per cent cheaper than the price cap, from April, if you fixed now, you’d actually see the differential increase to probably 15 per cent or 16 per cent cheaper than the price cap, which is about a £200 savings per year.
“This is because some of the policy costs that we were paying for on our bills have either been got rid of or shifted to general taxation, and that comes off all bills, not the price cap.
“So this is a great time to compare, fix, and ditch what I tend to call the ‘pants cap’. And for far more details and help and exactly what you need to do, have a listen to the podcast.”
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For a typical household paying via Direct Debit for both gas and electricity, the total annual bill will stand at £1,641. According to Ofgem, the recent Government budget measures relating to policy costs are primarily responsible for driving down this reduction.
The new cap represents a substantial decrease and sits more than £200 below last year’s level. This reduction mirrors the Government’s commitment to remove £150 in policy costs from energy bills.
Customers paying by direct debit or using smart prepayment meters typically benefit from lower energy bills. On the Money Saving Expert website, Mr Lewis said: “To be fair, this time round, you need to understand that the main reason the Price Cap is dropping is the same as the reason we’re going to see other tariffs dropping on 1 April. That’s because there have been underlying changes to the policy costs of energy.
“The Government announced in the last Budget it’s the so-called £150 off bills, though it’s actually going to be slightly less because other costs have gone up. Now, what’s happening is currently there’s an ECO scheme that ends in March, so that’s coming off bills, and there’s a Renewable Obligation that you pay for on your bill, and 75 per cent of that is being shifted from energy bills to the State, so general taxation or debt, however you see it.
“So those policy amounts are coming off the bill. And because of that, that’s what’s driving the Price Cap coming down. But it’s also meaning that all other tariffs are coming down too.”
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“Our focus at Ofgem remains on bearing down on the costs within our control, and unlocking the investment needed to support the transition to a more stable energy system over the longer term.
“We’re also seeing encouraging signs of greater engagement and competition, with switching increasing by almost 20% year on year. More households are choosing time‐of‐use tariffs that offer cheaper off‐peak rates, and suppliers are offering a wider range of products, including deals with savings at evenings or weekends.
“The price cap protects households from overpaying for energy, but it’s a safety net. Last year, consumers on fixed deals paid around £115 less than the cap on average, so we’d encourage people to speak to their supplier about the options available and consider whether a different tariff or payment method could help bring their bills down further.”
