This page will seek to explore the pros and cons of opting for a fixed rate tariff between now and 2018, and whether this will offer you the best value for money.
Many people are currently on fixed rate tariffs, taking advantage of the best offers to make sure that their energy bills do no vary wildly and incur surprisingly high charges.
Others prefer variable tariffs, which are cheaper in the summer and more expensive in the winter, and relate to your energy consumption and the market price of energy. A third option is a prepayment meter, something we rarely recommend, but is a suitable energy option for low income households.
Conservative price cap
It’s vital to note that this article’s defining decision could alter depending on who wins the general election on June 8th 2017, with the Conservative’s Theresa May promising an energy cap if elected.
This price cap could positively affect 18 million households, saving them around £100 a year each, or 27p a day. In this scenario, Ofgem would be given the power to reset the maximum energy price every six months to reflect market changes.
If the Conservatives were to win the snap election the answer to ‘Should I fix my energy prices until 2018?’ would be yes, as experts suggest that a maximum cap would only encourage all of the independent companies to raise their prices. If wholesale market prices spiked, the smaller energy companies might struggle to cope and could go under.
A low-priced, medium-sized energy company could provide the best price and security for price fixing.
The weaker pound
Energy suppliers in the UK often purchase their energy from foreign sources. To counteract the falling value of the pound, which had a drastic downturn in June 2016, fixed rate bill payers have already seen their bills increase by an average of £50 per year.
For those on standard tariffs, the most expensive energy option, bills could have already risen by over £250 in the last year, putting an increased financial burden on the common man or woman.
Experts suggest that the only direction the prices are going is up, meaning that now is the best time to find a good deal.
These experts would suggest that the answer to ‘Should I fix my energy prices until 2018?’ is a resounding ‘yes’. The longer bill payers wait to see how the market will change, the more they will end up paying, it is advised.
We’ve written several articles raising some of the pros and cons of switching to a smaller or independent energy supplier, but none have raised the importance of fixing energy prices in this economic climate. For several years, the independent suppliers have provided the best prices in the market, whereas the Big Six have been consistently among the most expensive.
Companies such as E and Spark Energy are offering great fixed prepayment prices for the next twelve months, though these prices are still around £1,000 a year, illustrating the weakness of the pound and price hikes, as prices in previous years have been a lot lower.
One benefit of independent energy suppliers is where their energy comes from, with several of them, such as Good Energy and Ecotricity being hooked up to huge renewable energy networks in the UK. The advantage of this is that their prices are not affected by the weak pound, as their energy is not imported.
This could suggest that the renewable energy provider’s prices will remain more consistent over the long run, but it is something we cannot say with absolute surety.
‘Should I fix my energy prices until 2018?’, well, with a renewable energy supplier, we would suggest that it’s a good idea, as not only will you be contributing to carbon savings, but you have a reduced chance of facing price hikes based on market disruptions and economic activities.
As you can see, varying factors and wholesale confusion means that there’s no concrete answer, though you can make your own assumptions based on the research provided on this page.
If you would like to know more about fixed energy prices, please get in touch.