Should you Fix your Energy Prices?

The choice to fix energy prices isn't one-size-fits-all and depends on multiple factors. Fixing your energy prices doesn't mean your bill won't fluctuate-it will vary based on your energy usage. The concept of "fixing" prices refers to setting a fixed unit rate you are charged for energy use, and the standing charge you pay each day. There are three types of gas and electricity tariffs: Fixed, Variable, and Capped.

• 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

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

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 2024. This will enable you to compare your costs by NOT switching against those costs from any fixed tariffs you may be offered.

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) tend to be among the most expensive options available. However, given the current global market conditions, this is not the case.

One of the reasons for this is the 'Energy Price Cap' that was implemented by Ofgem, the energy regulator, in 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. The cap is based on historic wholesale prices, usually ending two months before they are imposed.

However, due to unprecedented global wholesale price fluctuations, this cap is currently resulting in 'Standard Variable' tariffs being less expensive than they would be under normal market conditions. This situation is putting pressure on suppliers who may be forced to sell at a loss, leading to instability in the energy market.

Despite the current conditions, the 'Energy Price Cap' offers a type of fixed tariff for a period of six months at a very competitive rate. This is subject to change and the cap is reviewed regularly by Ofgem.

For these reasons, it may be in your best interest to stay on these "Standard Variable" tariffs 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 cheaper energy deals become available.

However, it's important to monitor the market closely as changes can occur rapidly. The situation in Ukraine, for instance, 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 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

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.