Deciding whether to fix your energy tariff or opt for a variable tariff has long been an important consideration for households hoping to keep their energy bills to a minimum.
It’s been a debate that has died off over the last few years, with the issues in the energy market meaning fixed tariffs effectively vanished.
However, with suppliers once again launching fixed energy tariffs, it’s time once again to ask whether or not you should fix your energy bills.
The return of fixed energy tariffs
The energy markets have been through a lot of turmoil over the last two years, initially with rising wholesale costs leading to the collapse of a host of energy suppliers in the UK. This was followed by the Russian invasion of Ukraine and the knock-on impact it has had on the energy market.
It meant that most suppliers largely withdrew fixed energy tariffs, leaving the majority of households on standard variable tariffs instead, which are protected by the energy price cap.
However, in the last few months, we have started to see energy suppliers begin to launch fixed energy tariffs again, mainly for their existing customers, with some undercutting the current price cap level of £2,074 for a typical household – though this is dropping by 7% to a typical £1,924/year from 1 October.
For example, Octopus Energy’s Loyal Octopus tariff is currently around 8% cheaper than the current energy price cap, while British Gas has a fix for its customers 4% under the current price cap – see will energy prices go down? for what’s expected to happen over the next year.
Here are the fixed energy deals currently available which are cheaper than the current energy price cap (all with a dual-fuel exit fees of £150). And then do read on for what you need to consider before switching.
|Supplier||Tariff||Average cost compared with July Price Cap||Who can get it?|
|Octopus Energy||Loyal Octopus 12M Fixed Sept 2023 12-month fix||8% less||All existing customers|
|British Gas||Smart Oct 24 v2 / Smart Fixed v6 12-month fix||4% less||All existing customers|
|E.on Next||Next Fixed 12m v2 12-month fix||2% less||New and existing customers via its site|
|Sainsbury's Energy||Sainsbury's Energy Renew Fixed 12 month v1 12-month fix||2% less||All existing customers.|
|Shell Energy||Energy November 2024 14-month fix||2% less||All new and existing customers.|
|So Energy||So Energy So Juniper 12-month fix||1% less||New and existing customers. Get it via Go.compare.|
|British Gas||British Gas Fixed Oct24 v2/ The Fixed One v25||1% less||All existing customers|
Why are fixed tariffs coming back?
One of the main factors for energy suppliers when it comes to putting together their tariffs is the price of energy on the wholesale markets. As the price of energy rocketed, suppliers felt unable to offer fixed energy tariffs, which is why they effectively vanished.
However, those wholesale energy costs have been declining for some time. And that has meant energy suppliers feel more confident about offering fixed energy tariffs.
There are still limits to that confidence, though. In many cases, the fixed energy tariffs are restricted to only existing customers. Suppliers aren’t doing battle for other suppliers’ customers just yet. The pricing is also pretty modest, in many cases representing only a small improvement on what you are likely to pay with a tariff protected by the energy price cap.
What will happen to energy prices?
To make a decision on fixing, you need to understand what is likely to happen to the energy price cap over the next year.
Here are the latest predictions (as of 25 August) from Cornwall Insight on how the price cap is expected to fluctuate on average. Basically, this is the price you would pay if you don’t fix your energy.
Remember that these are simply predictions and that these things can change around pretty quickly.
|Time period||Price cap on current typical use figures||Price cap on new typical use figures|
|Current cap: 1 Jul 2023 to 30 September 2023||£2,074 a year||£1,976 a year|
|Confirmed new cap: 1 October 2023 to 31 December 2023||DOWN 7% £1,924 a year||DOWN 7% £1,834 a year|
|1 January 2024 to 31 March 2024||UP 6% £2,033 a year - PREDICTION||UP 5% £1,932 a year - PREDICTION|
|1 April 2024 to 30 June 2024||DOWN 3% £1,964 a year - PREDICTION||DOWN 3% £1,868 a year - PREDICTION|
|1 July 2024 to 30 September 2024||DOWN 2% £1,917 a year - PREDICTION||DOWN 2% £1,822 a year - PREDICTION|
|1 October 2024 to 31 December 2024||UP 3% £1,975 a year - PREDICTION||UP 3% £1,874 a year - PREDICTION|
Note, Ofgem’s current typical use figures are 2,900kWh for electricity and 12,000kWh of gas. From October this typical use figure will fall slightly to 2,700 kWh for electricity and 11,500kWh for gas, so annual prices may look cheaper than they are in reality when the new figures are used.
The pros of fixing your energy tariff
There are some big positives that come from fixing your energy tariff.
If you find a fixed deal for less than the current price cap, it might be worth considering, especially if you are someone that really values price certainty and want to lock your rates in for a year now, without having to worry about what happens in the energy market over that period.
In fact, that certainty is another crucial selling point. With a fixed energy tariff, you know broadly what you will be paying for your energy each month. The supplier works out what your likely annual use is going to cost, and then divides that into 12 equal monthly payments.
Having that knowledge around what your outgoings on energy will be is a positive at all times, but particularly in the current environment when so many are seeing our household finances stretched. Knowing what your energy will cost you makes budgeting a lot easier – though of course, if you start to use more, your bill will go up.
The cons of fixing your energy tariff
Before you rush off to snap up a new fixed energy tariff, it’s important to be aware of the possible downsides.
For example, fixing your tariff may not actually be an option. There are only a couple of fixed tariffs open to new customers. In many cases, the fixed tariffs on offer are only available to existing customers. Depending on your location and supplier, you may not have much in the way of choice.
It’s also debatable whether or not these tariffs really will save you any money over the course of a year. Many work out only marginally cheaper than the current level of the energy price cap.
As a result, what may look like a saving today could end up costing you more overall than remaining on a tariff protected by the energy price cap. Given fixed tariffs tend to charge hefty exit fees, there will be a further cost if you change your mind and want to move elsewhere, too. So if prices drop elsewhere, you may be locked into a deal paying more than if you had stayed where you were.
Should I fix my energy tariff?
There’s no definitive answer here as no one can predict with any certainty exactly what will happen to energy prices in the future. Ultimately, it will come down to your own circumstances and attitude to risk. But there are some factors to bear in mind to help you work out if it’s a good idea for you to fix at the moment.
The first will be understanding what fixed tariffs are available to you. This means checking not only what your current supplier is offering to existing customers but also what other suppliers may be offering in your area.
It’s important here to check the unit cost they charge for gas and electricity, as well as the standing charge. You can then work out what the energy bill is likely to be over a year for your actual energy use, rather than the headline quote.
You will also need to work out for yourself how important the certainty offered by a fixed tariff is. If it’s important for your budgeting that you know exactly what your bill will be each month, a fixed tariff will be more appealing. But if you can live with a bit of fluctuation every now and then, you may be better off holding off.
Finally, it’s worth considering what may lie ahead for the energy market. The energy price cap will drop to £1,924 annually for the typical household from October to 31 December, which means cheaper energy bills without switching energy tariffs.
But, even though the price cap will drop below £2,000, energy prices will still be around double compared to what households were paying two years ago.
Another big geopolitical event, like the war in Ukraine, could have a big impact on wholesale costs and therefore our energy bills.
The future of energy prices remains uncertain, and projections can shift. An energy deal that looks inviting now may not be your best bet in the future if the price cap decreases further. You wouldn’t want to be stuck with a costly plan with heavy exit fees.
On the flip side, in a scenario where prices shoot up, leading to higher energy costs, you may miss out on the chance for a cheaper deal. Ultimately, it all comes down to your approach to risk.