You might want to wait to fix your energy deal.
We’re seeing new fixed price tariffs coming back on the market. Is now the time to fix, or should we hold out for a better price? Here’s what you need to know.
What is an energy fix?
A fixed energy deal is just what it sounds like – you pay a set amount per unit for your gas and electricity, so if energy prices change, you’re not impacted until your deal comes to an end.
Historically, fixed tariffs had always been cheaper than the price cap, meaning switching and fixing your energy price each year was a pretty sure-fire way of cutting down your utility bills by potentially hundreds of pounds a year.
But when energy prices soared, it put a temporary end to these deals. Instead the lowest price we’d all pay was either the energy price cap or the Energy Price Guarantee (EPG) – whichever was lower.
Why are fixes back?
On July 1 2023, for the first time since the EPG was introduced last October, the energy price cap will be falling lower than the guarantee.
Since the cost of energy is falling rather than increasing, it’s becoming possible for some suppliers to gradually bring energy fixes back on the market.
This begs the question: is it time to fix your energy costs, or should we hold up for better deals down the line?
Is it a good deal? Here’s how to work it out
When you’re looking at deals, you need a benchmark to compare the promised saving against. Be careful not to use your current bill – it’s what you’ll be paying when the lower July price cap starts which you need to beat.
But that’s not as easy as it sounds. You’ll need to work out what your bills will be from 1 July after this new cap comes into play if you were to stay on the capped standard variable tariff.
Here’s how to work out your bills under the new price cap
Firstly, the £2,074 price cap figure we’re seeing all over the place isn’t the maximum you can be charged – it’s based on the “typical” household. So it’ll change based on how much energy you actually use. If you use more energy in your household than the “typical” household, you’ll likely see an annual bill above this. If you use less, you’ll see lower bills.
It’s a little bit of a faff to work out how the change to the price cap applies to you, so it’s easier to broadly think about it as a 17% decrease. You can get a general idea of your new monthly bill by taking your current monthly direct debit and taking 17% off it, or multiplying it by 0.83 – this is how much you’ll expect to be spending each month from July.
This is just a rough estimate, so it’s not going to be exactly correct, but it gives you something you can work with.
When checking out a fix, make sure the estimated energy usage is broadly correct against your actual usage, this should give you some like for like prices.
All you’ll need to do is compare your July price against the fixed deal. If it’s significantly lower, you may want to go for it, if it’s higher or broadly the same, you’ll want to make an executive decision on how much you value certainty.
What about future energy price changes?
The price cap changes every three months. At the moment, analysts are predicting that the October price cap will be another 5.5% lower at £1,932 for the typical household.
They’re then predicting that the January 2024 price cap will be slightly higher, at £1,943. This could, and probably will, change. But it helps to give you an idea of whether a fix now is going to be higher or lower than future caps.
Who has offered fixed price switches?
Until recently, you’d find fixing (and switching) deals via comparison sites. That’s not happening this time (yet). Instead, a handful of energy providers and comparison sites have offered fixed price switches to existing customers.
So far, the fixes that have been made available haven’t been brilliant, saving only up to £100 or so annually for the typical household, with a few higher than the cap. If you missed out on any of these, you haven’t really missed much just yet.
Of course, there are potential benefits to fixing, which we’ll touch on later, but it would stop you from taking advantage of any further falls which could still be on the horizon.
Here’s a snapshot of the deals so far to give you an idea. You’ll need to keep an eye on emails from your energy supplier and keep checking for latest offers.
So Energy was offering a fixed deal called So Juniper, which it withdrew on Friday June 16 2023. This was available to existing customers and those signed up to Confused.com or uSwitch’s energy alerts and was around £27 below the July price cap.
Utility Warehouse has offered new and existing customers a fixed price around £100 below the July price cap but only for customers that also signed up for another two utilities with Utility Warehouse.
E.on has offered its customers a price fix around £25 below the July price cap.
Ovo was offering a fix at around £150 over the July price cap to its existing customers
British Gas has emailed current customers to say that they’ll be bringing in new fixed deals “soon”.
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Why you would fix
The best reason to fix your energy deal is price certainty. You know that for a set period your bill will not change – you can sit back and relax through any upcoming energy price soar with the knowledge that your payments will only change if you use more or less energy.
Why you wouldn’t fix
The main downside of fixing your energy tariff is that you’re locked in. If bills go down, you’re locked in at the higher price. Last year there was a reduction in bills for those locked above the Energy Price Guarantee, so if things really go sour, there’s a chance you may have some protection, but it’s not guaranteed.
In addition, the exit fees have gone through the roof. With most of the tariffs offered so far, you’d expect to spend around £75 per fuel to exit your agreement, if not more.
Should I fix my energy deal?
It could — at last — be time to fix your energy tariff, if you’re offered a good one.
Due to soaring energy prices, these deals haven’t been on the market for quite some time, so they’re slowly making their way back — you could hold out for something a little more competitive down the line, but it also makes sense to look for price certainty, especially with the cost of living rising.
If energy prices make you a little nervous and there’s a deal available to you, it could be worthwhile to fix onto one and put it to the back of your mind for the year. You may lose out a little bit if prices come down further, but you’d be able to factor in some certainties when it comes to your bills.
The hope is that the market will become competitive, offering a more lucrative set of deals for consumers.