Is it time to fix your energy deal?
As a result of various factors, wholesale energy prices rocketed in September 2021 but have lowered significantly in the past few months. Ofgem has announced that new level of the energy price cap will be £2,074 from July - this is lower than the level of the government's Energy Price Guarantee, which is £2,500 per year for a medium use average-sized household paying by Direct Debit. With wholesale prices dropping, there is no reason why fixed deals can't return to the market, which is expected to happen soon.
With these figures in mind, those who become eligible for one of these fixed deals may now be wondering if it's worth locking in a fix if you want to be sure about the amount you could pay.
What are the figures I need to know?
A lot of the confusion around average figures and capped unit rates stems from the fact that the energy price cap and the Energy Price Guarantee are two systems that have the same purpose - capping unit rates and standing charges for standard variable tariffs - but run simultaneously together.
The important thing for customers to know is: whichever one has the lower level is the one that suppliers will use to set their prices. The government sets the level of the Energy Price Guarantee in response to the price cap level and Ofgem sets the level of the price cap in response to wholesale energy prices.
So while the Energy Price Guarantee is set at £2,500, the level of the price cap is set at £2,074. We don't yet know the price of any fixed deals that might be launched, but it's likely they'll be around the price cap level.
The complication is that wholesale energy prices could still go up or down and, with the price cap now being recalculated every three months, there is the possibility that a fixed deal which starts as the cheapest option could become a more expensive option as time wears on.
What are the pros and cons of fixing energy now?
Do consider exit fees. You may change your mind about your fixed deal and want to switch. If this happens after your 14-day cooling-off period, you might have to pay an exit fee. Not all tariffs have them but some do, so make sure you know whether yours does.
Do consider the length of the deal. Most deals are for 12 or 24 months. During this time the price cap could rise or fall depending on market conditions, so consider how long you would like to stay locked in for.
Do stay informed. It’s important to keep a close eye on the market and run regular comparisons to see what deals are on offer. By signing up to alerts, you will be able to stay close to what’s happening in the energy market and be informed when a good deal comes along.
Don’t just go for the first deal you’re offered. Just because a deal is available doesn’t mean it is a good one or the right one for you. Consider the price of the deal, how long it is for and how important stability is for you right now.
Don’t get a deal you cannot afford. Make sure you can afford the deal you choose to take and do not feel pressured into taking one that you will struggle to pay for.
Don’t just look at the direct debit amount. The price you pay through Direct Debit each month is usually based on the estimated amount you will use over a year and may not be the actual cost. Make sure you look at the unit price and standing charge so you can understand how much you will be charged for your energy usage and how it differs from what you are currently paying.
Customers will have to consider their finances and how important price certainty is to them before signing up to a fixed deal. The right decision for someone else might not be the right decision for you, so make sure you consider all your options carefully.
Make sure your details are up to date below so you're ready to act (if that's what you decide) as soon as deals are available.
Get ready to switch energy
• Be the first to hear when deals arrive • Save your details for a faster switch
Read more:
Get help paying your energy bills
Get help paying your energy bills. Options for those struggling - find out if you are eligible for an energy grant or a rebate on your energy bills.
Learn more
What is Ofgem's energy price cap 2023? - Uswitch
Information on the energy price cap set by Ofgem, set at £2,074 from July until October 2023.
Learn more
Government energy relief measures: your questions answered
The government has announced a series of relief measures aimed at helping energy customers through a difficult financial period. Find out what's on the table here.
Learn more