Martin Lewis: The Price Cap is still a Pants Cap, get off it! A 7% fall on 1 July isn’t enough

Today, the energy regulator Ofgem have announced that the Energy Price Cap has fallen 7%.

Reacting to the news, Martin Lewis, founder of MoneySavingExpert.com said:

"Today’s announcement that the Price Cap is to fall by 7%, is welcome, but nothing to shout home about. It is only back to roughly a similar rate to where it was earlier in the year, before April’s rise, and crucially energy bills this July will still be 10% higher than at the same time last year.

Compare that to the cheapest fixes on the market today, which are 18% below the current Cap, proving the Price Cap is a Pants Cap. It was only ever meant to be a back-stop tariff for those unable to switch, yet during the energy crisis it effectively became a regulated price, and still today, 65% of homes are on tariffs dictated by the Cap.

For all but those on pre-payment meters, where sadly there’s little choice, I’d urge people to get off the Cap, use a whole-of-market comparison site, like www.CheapEnergyClub.com to find their cheapest fix. That will instantly cut people’s bills, without any need to wait until July, and if analysts' current Price Cap predictions prove true, would substantially undercut the Cap in every period for the next year.

Our recent analysis shows, that at every point over the last twelve months, grabbing the cheapest fix on the market would’ve saved you very substantially over the Price Cap.

This is not a £129 a year saving

Many people, including Ofgem are quoting typical prices, and saying this is a drop of £129 a year. That’s not correct. The new Price Cap only lasts three months, so quoting an annualised price is meaningless, never mind an annualised price based on typical use.

Instead, in simple terms, it means for every £100 you pay for energy now, in July, August and September you will typically pay roughly £93. As the cut is on both unit rate and standing charges, this time the impact is pretty uniform for lower and higher users, though those with gas will typically see more of a fall, as its price is falling more than electricity.

Though there are also regional variation in prices (we're updating our calc on MSE to be available later today so you can see the direct impact).

When comparing beware savings figures are now OVERINFLATED

While I’m urging people to do a comparison right now, as savings are potentially large, for those on a Price Cap tariff currently, it’s important for people to be aware that sites will show your savings compared to the current Price Cap, not the one it’ll drop to in July. That means savings will be exaggerated by 7%, and you need to factor that into your calculations."

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