With energy bills set to fall from July thanks to the new Energy Price Cap, deciding whether to fix your rates isn’t easy.
The cap limits how much suppliers can charge for gas or electricity per KWh,and will fall to £2,074 a year from July 1 for a typical household paying by direct debit – a welcome change from £3,280 in April (and a whopping £4,279 at the beginning of 2023).
It’s a cap on the unit price, not a cap on the actual bill – and it’s still a lot higher than January 2019 when a typical household bill was £1,137 a year.
That will mean that the Energy Price Guarantee (the temporary cap-on-a-cap), which is set to rise to £3,000, will effectively be rendered useless. You pay the lower of the two.
So what does this mean for energy bills and should you fix your prices?
Let’s find out.
What are fixed energy prices?
Fixed energy tariffs for gas and electricity provide a locked-in rate per kilowatt hour for a set term (usually a year or more).
The idea is so you know what you’ll be paying and are protected from any price rises during the term.
However, it’s important to remember that it’s the unit price for energy that’s fixed, not the overall bill, so if you use more energy one month than another, you’ll still pay for it.
Should I fix prices?
It depends on the deal offered.
Points to consider when fixing your energy prices
Uswitch says these are points to bear in mind:
- Exit fees – if the tariff has one, and you change your mind after the 14-day cooling off period, you might have to pay them.
- The length of the deal – most are for 12 or 24 months – so think about how long you want to lock-in for.
- The cost – avoid deals you really can’t afford. What’s right for someone else might not be right for you.
- Don’t just look at the direct debit amount offered – check the unit price and standing charge and compare those to your current deal and what’s on offer.
- Your fixed plan will end on a set date, but you don’t need to wait until then to switch. You can move to a new plan 49 days before your current plan ends without paying an exit fee.
The key is to look at what’s likely to happen over the next year, says Martin Lewis’ Money Saving Expert.
Energy prices are set to fall by 17% from July 1 for those on standard tariffs thanks to the new Energy Price Cap.
Emily Seymour, Which? Energy Editor, said: ‘While the new price cap on variable tariff rates will see typical bills drop by around £500 (a year), energy bills will be almost double the amount they were before the energy crisis began.’
MSE’s ‘loose’ prediction – based on analysis by Cornwall Insight – is a further drop in the Energy Price Cap from October to December of another 7%.
Beyond that, the site admits, is ‘crystal ball-gazing’. But it’s possible there could be a 1% rise in the EPG between January and March 2024.
Martin says: ‘Based on current predictions, if any firm offers a fix for under the July Price Cap (so about 17% cheaper than current rates) that looks a decent deal.
‘If it’s the same or a little more, it may still be worth considering for the sake of price certainty.’
However, he adds a note of caution: ‘Of course, current predictions are just predictions, so I can’t promise to be right with hindsight.’
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