Martin Lewis has warned an “substantial” increase in energy bills is coming this year, with a new price cap coming today.

Speaking on Thursday night’s instalment of the Martin Lewis Money Show, the money saving guru warned ITV viewers that people could end up paying more for their gas and electricity.

The Money Saving Expert founder said the new price cap will come into effect on April 1.

He said: "A new energy price cap will be announced tomorrow to start on April the 1.

"The main cap is for those on standard tariffs paying by direct debit - that is over half of you.

"In fact it's a rate cap not a price cap, in reality. There is no one price you should pay more than. The more you use, the higher your cap - the less you use, the less it is.

"The current rate is £1,042 per year for somebody with a typical usage.

"And most big companies will allow this.

"My prediction is that this will rise by £70 to £90 a year. The new cap starts on April 1 and lasts six months."

What is the price cap?

The energy price cap is set twice a year by Ofgem, and is designed to protect more than half of households in England, Wales and Scotland which are on poor value default tariffs. This is often because customers have loyally stuck with the same provider for years, and any previous fixed rate discounted deal has expired. Northern Ireland set its own price cap.

The cap sets the prices that suppliers can charge for each unit of energy. However, this does not mean there is a limit to how much people can pay on their bills. That is still determined by the amount of gas and electricity used in each household.

Who is affected by the increase?

The price increase will likely affect 11 million default tariff customers.

For those using payment meters, there will be an increase of £87, to £1,156, affecting four million customers.

The increase will happen on 1 April 2021.

Ofgem has been allowing the increases to cover high levels of debt from customers unable to pay their energy bills due to the impact of Covid-19 on finances.

Jonathan Brearley, CEO of Ofgem, said: “Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic.

“We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.”

Over the winter period, the price cap level fell by £84 in October, in reaction to a drop in wholesale prices. However, the demand for energy has now recovered, pushing the wholesale puce back up to levels more normally seen.

Shop for deals

Customers looking to avoid an increase in their bills have been encouraged to to shop around for deals before 1 April 2021.

Brearley added: “The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal.

“As the UK still faces challenges around Covid-19, during this exceptional time I expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need.”