Should you Fix your Energy Prices until 2023?

This isn't a "one size fits all" answer. Let me explain why so you can make an informed decision on your next move.

Firstly, fixing your gas and electricity prices doesn't mean your energy bill can't go up or down. That is dependent on your average energy usage in terms of how much energy you use e.g. if you install a few sunbeds and a heated swimming pool in your garden then your energy usage, and therefore your bills, will go up. When we talk about "fixing" energy prices, we mean you are fixing the unit rate you are charged for the energy you use and, as is common-place these day, the standing charge you pay each and every day.

Different types of gas and electricity tariff:

• Fixed - the unit rate and standing charge you pay per kilowatt hour doesn't change for the duration of the tariff
• Variable - the unit rate and standing charge you pay can go up or down as market conditions dictate
• Capped - the unit rate and standing charge you pay can come down but it can't go up

Here we've put together a calculator enabling you to enter your monthly spend to see what the costs of your energy would be over through to March 2023. This will enable you to compare your costs by NOT switching against those costs from any fixed tariffs you may be offered.

Why you should NOT fix right now

The market is in unchartered territory. Historically, and normally, 'Standard Variable' tariffs (the tariffs you are on if you've never switched, your supplier has gone bust or your fixed tariff has expired) are amongst the most expensive tariffs on the market. It is for this reason that Ofgem, the energy regulator, intervened to stop energy suppliers "profiteering" from customer apathy and introduced the 'Energy Price Cap' in 2019 to control how much energy suppliers can charge on these tariffs. However, this cap is measured on historic wholesale prices usually ending two months before they are imposed. As such, during unprecedented global wholesale movements (as we're seeing right now), the cap can actually mean prices are LOWER than they should be leading to the situation we have now during the September 2021 "energy crisis" where the 'Energy Price Cap' is protecting consumers BUT is killing suppliers who are essentially forced to sell at a loss…and therefore go bust.

In a nutshell, the 'Energy Price Cap' will be offering customers a 6-month "fixed" tariff at the lowest rate in the market, by over £800 a year, until 1st April 2022 - as things stand.

However, as was announced on 3rd February 2022, the 'Energy Price Cap' will then increase by an eye-watering 54% from 1st April 2022 taking the average gas and electricity bill to £1,971. This rise is a huge financial pressure for millions of homes with many of them being pushed in to what is known as 'Fuel Poverty' i.e. spending more than 10% of their income on their energy bills. However, despite this rise, these prices are STILL the cheapest deals on the market by about £300 - £600 at the time of writing. Remember, under the current 'Energy Price Cap', these prices are fixed again until 1st October 2022 meaning you're on the best energy tariff by DOING NOTHING.

For the reasons above, we say customers generally speaking are better sitting on these "Standard Variable" tariffs until the cap changes again on 1st April 2022. By doing so, you are guaranteeing the lowest rates on the market as you go through the coldest months of the year to ensure you keep your energy bills down.

It also means that you are free to switch without facing an "exit fee" (which can be as much as £75 per fuel) if we were to see cheaper energy deals become available. Unfortunately, with escalating issues in Ukraine, this seems unlikely but not impossible.

Why you SHOULD fix right now

The only reason we can see why you should fix now is:

1. You want peace of mind
2. You can afford the premium you will pay to "fix" now
3. You want to hedge your bets and lock in now for the next 2-3 years
4. Somehow your current supplier has an exclusive deal they can offer to keep your bills down (use a 54% rise to your current costs as a sign for what is good...as hard as that may seem).

There are some tariffs on the market fixed until 2024 which, without having a crystal ball, could be a sound decision for those able (financially!) and willing to take one. The only major downside in the short-term is that this will mean you pay more over the next 6 months than if you stayed on a "Standard Variable" tariff.

If you do want to "fix", we urge you to switch to a larger supplier who is taking on customers of bust energy suppliers, look out for "exit fees" and do a comparison to ensure you are 100% clear on the costs you will incur.

The suppliers taking on customers right now, and showing increased levels of confidence through these turbulent times are:

1. Octopus Energy
2. Shell Energy
3. British Gas
4. EDF Energy
5. Scottish Power
6. E.ON

What are the cheapest fixed rate energy tariffs?

If you're not sure whether a fixed rate tariff is for you, then our table below shows a list of the top 10 fixed rate energy deals on the market today.

Estimated Annual Bill is based on prices from the London region with an annual gas consumption of 12,000kWh and electricity consumption of 2,900kWh. Your energy bill will vary depending on the region you live in and your annual energy consumption.

Is it cheaper to fix energy prices?

The answer to this has flipped between yes and no for as long as I can remember and simply comes down to market conditions. However, with "Standard Variable" tariffs now being the cheapest gas and electricity tariffs on the market by some distance the answer is "no". It is not cheaper to fix your energy costs. Speaking more generally, when things return to normal, if wholesale energy prices drop, then it may be possible to find a cheaper variable tariff as the energy suppliers are less exposed and if they get hit with a spike in prices they can quickly pass it on to you the customer. You get the benefits of cheaper energy prices when it's smooth sailing but the second that changes the increase in cost will be coming your way.

If you therefore want the cheapest energy tariff possible then you would need to do an energy price comparison through an approved and Ofgem accredited price comparison site to see whether it's cheaper to fix your energy prices or go variable at that given moment in time. However, my advice, which I deem to be that I would give to a friend or family member over a cold pint in the local pub, is to "fix" your energy prices IF you can afford to do it and you want protection over future price hikes as we expect to see again in April 2022. If not, then ride this storm out and sit on your suppliers "Standard Variable" tariff.

How long should you fix for?

Personally, I wouldn't fix for longer than 12-months. I think the market is active enough and competitive enough to mean that come the end of your existing energy tariff there will be plenty of cheap energy deals out there to ensure you continue to save on your home energy bills.

Energy tariffs can offer up fixed unit rates for 1, 2 or 3 years but here you are potentially paying a premium and could miss out on better savings. Equally, it's highly likely that for this you will be locked in through higher early termination fees (also known as exit fees) to stop you switching elsewhere for the term of that deal. These could be as high as £100 per fuel so this should also be considered when making your final decision.

How to find the best fixed energy tariff?

Our quick guide for this would be:

1. Ensure you have a copy of your most recent energy bill to hand and identify your projected or estimated annual consumption in kilowatt hours (kwh).
2. Visit an Ofgem accredited price comparison site (such as TheEnergyShop.com), to carry out your energy comparison.
3. Ensure to check the tariffs are fixed and look at the term of the deal e.g. 1, 2 or 3 years.
4. Check the applicable exit fees to see how much you would be charged if you switched energy during the term of the tariff.
5. Look at customer reviews for the gas and electricity supplier you have short-listed by visiting websites such as TrustPilot. I also think it's a good idea to check out the energy supplier's Twitter feed to see what customers are messaging them about. You want to see good responses and to look out for any trends e.g. issues with call centre support.
6. Once you have picked your new energy tariff, go ahead and switch energy supplier through the selected price comparison website OR by calling the energy supplier directly. Some tariffs are exclusive to price comparison sites though so be careful not to be switched to something else as energy supplier agents are paid commission to switch you over the phone.

Ultimately, it's your call but hopefully in this quick guide I've put my thoughts and opinions across in a way that explains my decision. As always, we're open to any feedback and welcome and readers to reach out to us and help us to improve the advice we provide.