Martin Lewis explains how energy price cap announcement next week will affect bills

Martin Lewis has explained how next week's energy price cap announcement will affect household bills.

Analysts have predicted that energy bills will rise by an average of £500 a year despite an expected reduction in Ofgem’s price cap. The energy regulator is expected to announce on Monday (February 27) that it will drop its cap on the amount energy suppliers are able to charge by around £1,000 to £3,295, effective from April 1, according to the latest forecast from energy consultancy Cornwall Insight.

However, customers will pay about 20% more on their bills – approximately £500 – as the Government’s additional support in the form of the Energy Price Guarantee will be scrapped from April. In a series of tweets, the Money Saving Expert explained what this means for households.

READ MORE: Energy bills could rise by £500 despite price cap being brought down

He has also urged the government to postpone the energy bill increase until July. Martin explained: "The energy price cap (Cap) is set by Ofgem based on wholesale rates - those energy retailers pay. Until Oct 2022 solely it dictated the max standing charge & unit rates firms could levy. And as in recent times all firms charge near-enough the max, it set the price we paid.

"Then in Oct, the Govt introduced the Energy Price Guarantee (EPG), set to last til April 24, which means if the Cap is very high (as it is) the govt reduces what we pay, by subsidising it. Yet the rule is, if the Cap drops below the EPG, we will then pay the lower amount. In Apr, the govt plans to increase what we pay under the EPG by 20% And while wholesale prices have dropped a lot, as the Cap's time lagged, tho the April Cap will drop, it'll almost certainly still be above the EPG. So bills