Price rise fears and big six ‘price war’ are reigniting consumer interest in fixing energy prices for the future
Warnings over future price hikes and the recent battle amongst Britain’s big six energy suppliers to offer consumers the best fixed price deal, are reigniting consumers’ interest in fixing their energy prices for the future, says Uswitch.com, the independent price comparison and switching service.
The number of households opting for a guaranteed price is steadily increasing again with three in ten switchers (29%) now moving to the security of a fixed price plan. This compares to under one in ten (7%) last month.
However, this steady trickle still has some way to go before matching the flood of consumers flocking to fixed price tariffs in Autumn last year when suppliers started to announce winter price hikes. At its peak, three quarters of switchers (75%) were choosing fixed price tariffs, valuing the safety and security they could offer at a time when prices were on their way up.
Similar to a fixed-rate mortgage, fixed price energy plans allow consumers to safeguard against further energy price rises for a set period of time. It means that their price per unit of energy is fixed during this period – for anything up to just over 3 years.
While traditionally fixed price plans have carried a premium on the price, this has now changed. In fact, fixed price tariffs now regularly appear in the energy ‘best buy’ tables, meaning that consumers can enjoy a competitive price today as well as price protection in the future. More importantly, some fixed price tariffs don’t carry an early exit penalty. This is particularly important for consumers, especially when looking at a mid to long-term fix, as it means they are free to ditch their tariff at any point without being charged.
The fixed price landscape has changed so much in recent years that the cheapest energy plan on the market – Flow Energy’s Thames Fixed Online September 2014 – is actually fixed price. At £1,135 a year it is £218 a year cheaper than the average big six standard tariff for cash and cheque customers, and £130 cheaper than the average big six standard direct debit tariff. Cash and cheque customers would need to start paying by direct debit in order to benefit.
The fix on Flow Energy’s tariff expires at the end of August 2014. However, even slightly longer-term fixes can offer a good saving, along with peace of mind. EDF Energy’s Blue + Price Promise February 2015 protects against price hikes until 28th February, 2015. It has no early exit penalty and costs £1,192 a year, which is a saving of £161 against suppliers’ average standard cash and cheque price and a £73 saving against the big six suppliers’ average standard direct debit price.
The longest fixed price tariff on the market – npower’s Price Fix September 2016 – also has no early exit fee and costs £1,318 a year. This makes it £35 a year cheaper than the average standard cash or cheque tariff. However, it is £53 a year more expensive than the average big six standard direct debit tariff – although this small premium would be wiped out if suppliers hike their prices by just 4%.
|
Type of plan
|
Tariff name
|
Cost
|
Fixed until
|
Average standard (cash and cheque)
|
N/A
|
£1,353
|
N/A
| |
Average standard (direct debit)
|
N/A
|
£1,265
|
N/A
| |
Cheapest variable
|
SSE Discount Energy Bonus October 2014 (with paperless billing)
|
£1,146
|
N/A
| |
Cheapest fixed
|
Flow Energy’s Thames Fixed Online Sept 2014
|
£1,135*
|
31/8/2014
| |
Cheapest fixed no cancellation fees
|
EDF Energy’s Blue+Price Promise February 2015
|
£1,192
|
28/2/2015
| |
Longest-term fix, plus no cancellation fees
|
npower’s Price Fix September 2016
|
£1,318
|
30/9/2016
|
Source: Uswitch.com
Bill sizes are based on a medium user customer using 3,300 kWh of electricity and 16,500 kWh of gas paying by direct debit in arrears with bill sizes averaged across all regions, except for standard (cash and cheque). Average standard is an average of the big six suppliers. *Requires payment in advance.
Tom Lyon, energy expert at Uswitch.com, says: “Historically, fixed price plans used to carry a premium. However, we’re now seeing tariffs that are fixed, but also qualify as a ‘best buy’. This is great for consumers as it means they get to enjoy a competitive price today, along with price protection for the future. With so much uncertainty about future prices and with bills already having hit an all-time high, this is doubly important and gives consumers even more reassurance that they are making the right move.
“Some also don’t carry any early exit fees, which removes any risk from fixing as, if prices do fall in the future, you can simply ditch your tariff and move to a better deal without incurring any penalties. This puts consumers firmly in the driving seat. It’s also important to stress that the ‘fixed’ element of a fixed price tariff is in the amount charged per unit of energy used. So if you are on a fixed price plan, but make your home more energy efficient, you will still save money.”
Notes to editors
Uswitch.com data.
See table in release.
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