Martin Lewis has revealed the cheapest way to pay for your energy as the price cap is announced by Ofgem. The average household energy bill is to fall to its lowest point in two years from April after the regulator lowered its price cap in response to wholesale costs.
The current cap of £1,928 for a typical dual-fuel household in England, Scotland and Wales will drop to £1,690. It's worth noting that despite the reduction, the cap is still over £900 higher than what it was four years ago.
The energy price cap limits the amount of money providers can charge per unit of energy. It does not mean a cap on your bills, so you can both pay far more or less than the cap. The cap remaining relatively high has caused some controversy given British Gas recently announced annual profits of £751m in 2023, rising tenfold from £72m in 2022.
Reacting to the cap and how consumers can help limit their bills, MoneySavingExpert founder Martin Lewis revealed the cheapest way to pay for energy. The money guru said: "Prepay standing charges have been lowered to equalise them with Direct Debit, yet as prepay unit rates are cheaper, that means overall for a typical user from April, prepay will be about 3% cheaper.
"Prepay, which many of the most vulnerable use, was always the rip off, so this is a staggering turnaround. And this is unlikely to be a flash in the pan - this pricing structure is likely to continue for the foreseeable future.
"To be fair even on the current Price Cap prepay is fractionally cheaper, but that is due to a small Government subsidy. On 1 April the gap will grow, and all due to real pricing. So if you're on the Cap, moving to prepayment will see a saving."
However, Lewis has urged some to exercise caution when changing the way you pay, adding there are rarely any prepay deals on the market just now, but it may change in the future. He explained: "All the big money and discounts are thrown out to win new Direct Debit customers. So I strongly suspect Direct Debit will stay by far the overall cheapest for people who switch, but for those who don't, it'll be prepay."
Customers also need to be aware of a price increase which hasn't been as publicised as the cap getting lowered. For the pleasure of having gas-electric provided, the standing charge will rise to £334 for direct debit customers, increasing from around £300 for most people.
