Martin Lewis: Energy Price Guarantee rise would be 'act of national harm'

If the price rises in April, it's not firms, it's not regulators, it is the government putting people's prices up. Well, I wrote to the Chancellor three weeks ago, asking him to not increase the rise, the energy price guarantee in April by 20% as planned, for all the reasons that have just been outlined there. And most importantly, what you have to understand is if we do increase it, it would result in an act of national mental health harm. People have been battered by successive rises in energy bills, 14% rises in broadband, 7% in water, 5% in council tax. And for the sake of just three months, and you heard the explanation of why it's just three months there, to send millions of people another letter is bad for people's finances. It's bad for people's state of mental health. It's bad for consumer confidence.

It's bad for business. It puts inflation up. I cannot understand from any form of rationale why they would continue to do it. Now, I said on Monday before that we have the other statements that reading the rooms and you worked in this industry long enough to know when I say something like reading the rooms. I've had rooms to read. I thought that we are going to get a suspension of the rise. And in my letter, I asked for it to be postponed three months rather than cancelled, because in practical terms that's a cancellation, but it also the arguments I had back to me on lobbying for this were, what if wholesale rates rise again? Well, if you postpone the rise until July, then if wholesale rates were to rise, you still have that protection for the government coffers.

And if they don't rise, which we hope they won't, then there won't be an impact on anybody in there. Now, my letter is now supported by over 100 major charities, the likes of which citizens advice, Alzheimer's, the Samaritans and many others. It's also supported by Energy UK, which is the trade body of all the energy suppliers. And I think we have built up a substantial head of steam. It doesn't seem to me to make any sense politically for them not to do this. They have the wriggle room in the finances, because they're spending so much less on the energy price guarantee than they thought that they were. So I think it is likely to happen.

It should be happening now, because the problem of leaving it to the budget will be that the energy firms are legally obliged to notify people in advance of energy price rises. So people will get the letters, and then if the budget cancels it, they'll then get the letters not. I understand there's some political theater if they do that. In other words, it makes sure everybody in the country knows that the prices were going up and the government have just rescued them by not putting the prices up and maybe that's what they want. But I'd prefer people to have the peace of mind now. What we might be able to spot and watch out for though, is if the energy firms don't send those letters, because they're basically being told not to send those letters by the government, then I think that is a big clue that we're going to hear an announcement that it that it's the rise isn't happening. It's going to be all interesting always to hear what you have to say, Martin.

When I hear you say that you read the runes and you think this this this change of policy by the by the chancellor is on the way. I take that seriously when I when I say I think it's going to happen. It's pretty much me putting my finger in the air and guessing the way the political wind is blowing. When you say it, I take it you're getting indications from the people you talk to who know what they're talking about. All I'm saying I'm doing John is reading the runes. I'm going to leave it if you forgive me. No, but I understand when you say that I do understand what you're what you're saying.

It's not look, it is not a promise that they won't do this. It could still go up. I would prefer to phrase it as I would say if I're a betting man, which funnily enough, I'm not. I would say there are it is a better than 5050 chance that they will postpone or potentially cancel the energy price guarantee rise planned in April. Yeah, and from my stance as a campaigner on this and I've been doing this for quite, you know, quite a long time now. I have been very clear to say to people and some of the feedback I've had has said that this has been quite potent. So I'm quite glad I did it.

I'd be very clear to say to people, it isn't the regulator putting prices up. It isn't firms putting prices up. The energy guarantee is the only price. No broadband water, council taxes, not directly in government control. Some of them are to an extent. The energy price guarantee is government set pricing. So if the price rises in April, it's not firms, it's not regulators.

It is the government putting people's prices up. I have done that quite deliberately because of course that ramps up the pressure because there is a political expediency for them to bring it down. And what I will be careful to do and I put this on notice now and I've said this to them as well. If the government doesn't put it up, I will make sure that people know it is the government that hasn't put it up. Because as a campaigner, you have to play it both ways. If you're asking for something, you make sure everybody understands it. But if you then get what you want, you have to do some form of plaudits or laudations for the people who then deliver what you've asked for.

There's an additional incentive for the Chancellor. You get a round of applause from you. I just think you're saying it's more than 50% likely you're going to see this turnaround by the Chancellor. That is well worth noting. I mean, discussing this, we can see at the Treasury they have more revenue to play within this coming budget than they otherwise expected. There's an increase in tax revenues in the last month, which exceeded expectations. Some of that was what you might expect in the month that most people pay their tax bills.

But it still gives them maybe £30 billion more to play within the course of the year. And they're going to spend that, you'd imagine, in one-off things like this, like the energy price guarantee, where they're not committed to long-term spending. The wind does seem to be, you think, blowing in that way. A lot of people are martyred. They complain over and over again, surely not without justice, that wholesale prices of energy, that's been falling steeply. It's not being passed on to consumers. I was talking to one of the supply companies yesterday who say, look, it's not us.

They're not making any money. They're even losing money. What's the truth of that? That's half true, depending on who the supply company was. So I'll answer that first, and then I'll talk about the wholesale rates, if that's OK. Sure, please. So, look, what we have to understand is there are two types of energy firms. In fact, there are three.

There's energy retailers who don't make any form of energy. They're not gas, not renewables. They're not bringing electricity in. They're the ones, that's why over 20 of them went bust, and they're the ones that are not making any money at the moment, and they haven't been. You've got energy generators, those companies who do provide oil and gas or renewables, and they have been making huge, enormous profits. And then you've got those in the middle who do both, the classic centric of the parent of British gas. It's retail arm is losing money.

It's generating arm is making a shed load of money. It is worth noting competition law means it can't subsidize its retail arm unless it subsidize every other company's retail arm at the same time. So we couldn't use its generating profits to give cheaper prices to British gas customers, which is somewhat frustrating. You understand why for consumer, for competition law, but it's somewhat frustrating from a customer perspective. So when we talk about people get very angry about these baskets who are making so much money. They have to work out which energy firms are now in terms of what's going on with wholesale prices. Well, there are two elements to this.

The first is of course that since last October, we haven't been paying the price cap. The price cap is a price set by off-gem the regulator based on the wholesale prices with a tiny bit of profit on top of it. More than a tiny bit, but not excessive profit on top of it. And that it generates that it sets. But since last October, the energy price guarantee is a government subsidy on top of that. The difference between what we pay and the price cap is a subsidy paid directly to energy firms by the government. Without that, our current bills for somebody on typical use a meaningless figure, but good for illustration, wouldn't be 2,500 as they are now.

It would be 4,300. Yes. And if the price cap was doubled, they would have traveled. Now, when people say wholesale rates have come down, but our rates haven't and the price cap hasn't. Well, that's because the price cap is worked out based on a time lag. So the April to June price cap is based on wholesale prices averaged from the 17th of November to the 17th of February. And that's why it's started to drop towards the very end of last year in the beginning of this year.

So that's why even though it's coming down substantially, and I'll use the typical use figure because it's the easiest way to explain it again it's meaningless though it's all about what you use this that what really counts is coming down from 4,300 the January to March to 3,300. So that's the typical to June, but the prediction is the July to September will be at 2001 60 and then we'll stay on roughly that for the rest of the year. So the time lag is the issue with the price cap. Now some people say to me, yeah, yeah, it's going down it's not going down slowly but it went up quickly to be fair that isn't true. We when it went up. We also had a time lag it felt like it was going up quickly but we were running behind wholesale rates when they were rocketing. We were always three or six months depending on which which price cut.

Yes, yes. Well I'm John Pena and if you found that interesting we are here each day Monday to Thursday, five o'clock till seven o'clock on drive and from seven to late Pena and friends will be discussed the big stories of the day each day on time's radio.

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