MoneySavingExpert.com founder Martin Lewis has issued a crucial warning to consumers who recently locked in fixed-rate energy deals, offering a strategy to avoid hefty exit fees amid rising energy costs.
The 50-Day Rule: Your Escape Clause
Lewis’s advice centres on a little-known rule: energy suppliers cannot charge early exit fees if you leave a fixed-rate contract within the last 50 days of its term. “From day 49 onwards, no early exit penalties,” Lewis explained in a recent video message. “You’re absolutely free to leave if you choose to.”
This “escape clause” presents a valuable opportunity for consumers to seek better deals as the energy market fluctuates.
Strategic Planning: Timing is Key
Lewis recommends that consumers meticulously track their contract end dates and set a reminder 50 days prior. This allows them to compare available tariffs and determine if switching to a cheaper provider is advantageous. “If you can, you’re free to switch and they can’t lock you in with penalties,” Lewis advised. “If you can’t, stay where you are and milk it out till the last moment.”
Ofgem Price Cap Rise: A Driving Factor
The urgency of Lewis’s warning is underscored by Ofgem’s announcement of a 6.4% increase in the energy price cap from April. This means the average dual-fuel household paying by direct debit will see an annual increase of £111, bringing their total bill to £1,849.
Understanding the Price Cap
It’s crucial to understand that the Ofgem price cap does not limit the total amount you pay for energy. Instead, it sets a maximum unit price for gas and electricity, along with a daily standing charge. Your actual bill will depend on your energy consumption.
Impact on Different Payment Methods
- Pre-payment meter customers will see an increase from £1,690 to £1,803 per year.
- Customers paying upon receipt of their bill will face a rise from £1,851 to £1,969 annually.
Quarterly Revisions
Ofgem revises the price cap every three months, meaning the new rates will remain in effect until June 30, when they will be reassessed.
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Source: Information gathered from content published in the Manchester Evening News