Should you fix your energy prices or stay on the price cap?

The choice to fix energy prices isn't a one-size-fits-all and depends on multiple factors. Firstly, fixing your energy prices doesn't mean your bill won't fluctuate. If you use more energy, then your energy bill will increase. Conversely, if you use less energy, then your energy bill decrease. The concept of a "fixed" energy tariff simply refers to setting a fixed unit rate you are charged for the energy you use, and a fixed standing charge which you pay each day of the year.

To summarise against other types of energy tariff, here are the four most common types of gas and electricity tariffs in the UK: 

• Fixed - the unit rate per kilowatt hour (kwh) and daily standing charge don't change for the duration of the tariff e.g. 1 or 2 years. 
• Variable - the unit rate per kilowatt hour (kwh) and daily standing charge can go up or down as market conditions dictate. 
• Capped - the unit rate per kilowatt hour (kwh) and daily standing charge can come down but can't go up.
• Tracker - the unit rate per kilowatt hour (kwh) and daily standing charge can go up or down but will do so to a set amount e.g. as we currently see on the market, 3% below the 'Energy Price Cap'. 

It is important to note that the situation with energy prices is extremely fluid and can change rapidly based on a variety of factors including geopolitical issues and changes in the wholesale energy market as we've seen in recent years with the conflicts in Ukraine and the Middle East. 

Why you might not want to fix your energy prices right now

The energy market is in a unique and somewhat unstable state. Traditionally, 'Standard Variable' tariffs (the tariffs you are on if you've never switched, your supplier has gone bust, or your fixed tariff has expired) used to be the most expensive options available. However, this is not the case given current global market conditions and, in fact, has been the reverse since late-2021 with them now being amongst the cheapest prices available. 

One of the reasons for this is the 'Energy Price Cap' implemented by Ofgem, the energy regulator, back in April 2019. This cap was intended to prevent energy suppliers from profiting excessively from customer inaction by controlling how much they could charge on these variable tariffs. Originally changed every 6-months, looking back at historic wholesale prices usually ending two months prior, the cap is now adjusted every 3-months on the 1st of January, April, July and October each year. 

Despite the current conditions, the 'Energy Price Cap' arguably offers a type of fixed tariff for three months at what is now deemed a competitive rate compared to other available energy deals. 

For these reasons, it may be in your best interest to stay on your current energy supplier's "Standard Variable" tariff for the time being. By doing so, you are likely to enjoy the lowest rates on the market, especially during the colder months when energy usage tends to be higher. Moreover, you have the flexibility to switch without facing an "exit fee" if and when cheaper energy deals become available.

However, it's important to monitor the market closely as changes can occur rapidly. The ongoing geopolitical issues in Ukraine and the Middle East, could lead to further market instability and potentially higher energy prices.

Why you may want to fix your energy prices 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
3. You want to hedge your bets and lock in for the next 1, 2 or even 3 years
4. Somehow your current supplier has an exclusive deal they can offer to keep your bills down

There are some tariffs on the market fixed until 2026 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 might mean you pay more over the next 6-12 months than if you stayed on a "Standard Variable" tariff given where the latest forecasts are heading for 'Standard Variable Tariffs'. Read here for more information on the latest energy forecasts from industry experts - Cornwall Insight. 

If you do want to "fix", look out for "exit fees" and do a comparison to ensure you are 100% clear on the costs you will incur.

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 what 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, you want protection over future price hikes and you can afford any inflated exit fees to terminate if a better deal becomes available. If not, then ride this storm out and sit on your suppliers "Standard Variable" tariff like the vast majority of the UK - safety in numbers. 

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.