Martin Lewis slams 'pants' energy price cap and warns 'you shouldn't be on it'

Martin Lewis has branded Ofgem's price cap "pants" because eight out of 10 households are seeing bills jump when they could be making big savings by switching

Consumer champion Martin Lewis has slammed Britain’s “broken” energy market, as households were hit with bill hikes while suppliers’ costs fall.

Around 27 million customers saw their energy bills rise by 10% after regulator Ofgem upped its price cap for those on standard tariffs and prepayment meters earlier this week. But Mr Lewis, founder of the website Moneysavingexpert, branded it an energy “pants cap”, insisting no-one should be on their suppliers’ default tariff anymore. He said households should switch to cheaper fixed rate deals.

Ofgem’s price cap has risen by £149 to an average £1,717 a year. The regulator would argue this reflects suppliers’ costs, as they buy energy in advance to meet customers’ needs. The latest cap - which from covers now to December 31 - is partly based on wholesale energy prices from May to August, when they peaked. But those costs are now falling - partly because gas storage facilities across Europe are more than 94% full heading into winter.

Mr Lewis told the BBC: “The energy market has been perverse for a long time, but it is particularly perverse right now. The underlying mechanism for deciding what the price cap is is the wholesale rate, so what gas and electricity providers pay. This price cap is based on wholesale rates between the middle of May and the middle of August, and they peaked in August. Guess what they have done since? They’ve come down.

“So what we have now is a time-lagged price cap, where the price cap is going up when though wholesale rates are coming down right now. The reason this is important is, while the price cap is time-lagged, the switchable deals, they are able to take advantage of the current short-term lower wholesale rates. It’s a pants cap - you shouldn’t be on it.” He went on: “The whole structure of our energy market is broken.”

Wholesale gas prices in the UK - on a so-called day ahead basis - have fallen to 93.75p per therm. While volatile, it is around 30% down from mid-October last year. Norwegian exports to the continent remain steady, while supplies of gas from Russia to Europe via Ukraine continue, despite the ongoing war.

Industry experts Engie EnergyScan said: “The European gas balance remains comfortable overall and does not justify an additional strong rise in prices.” Consultancy Auxilione said in a daily note: “As we dive into the winter delivery period, temperatures are expected to stay close to seasonal normal for the weeks ahead and we have some 94% of the gas storage capacity filled.” However, it warned escalating conflict in the Middle East made for continued nervousness in the market.