Fixed-rate energy tariffs are gradually making a comeback to the UK market, offering consumers an alternative to the fluctuating energy price cap. After a prolonged period where fixed deals were largely unavailable due to volatile wholesale energy prices, providers are beginning to reintroduce options, prompting households to question whether now is the opportune moment to secure a tariff that could potentially beat future price cap increases.
The current Ofgem energy price cap is set at an average of £1,690 per year for a typical household paying by direct debit, effective from 1st April to 30th June 2024. However, forecasts from industry analysts, including Cornwall Insight, suggest a significant rise in the cap is highly likely for the autumn period, with some predicting it could exceed £1,900 from October. This anticipated increase is a key factor driving consumer interest in fixed deals, as locking in a rate now could offer protection against higher bills later in the year.
While fixed deals offer certainty regarding unit rates and standing charges for a set period, usually 12 or 24 months, they often come with exit fees if a customer decides to switch before the term ends. Consumers are therefore advised to carefully compare any fixed offer not just against the current price cap, but also against the widely predicted future cap levels. Some of the emerging fixed deals are currently priced above the existing cap, but could become competitive if the cap rises as expected.
Energy providers such as British Gas, Octopus Energy, E.ON Next, and EDF have started to offer fixed tariffs, with rates varying significantly. For example, some 12-month fixed deals have been observed around the £1,800-£1,900 mark for typical usage. This places them above the current cap but potentially below or on par with the projected October cap, making the decision complex for households trying to navigate the market.
Experts suggest that households with higher than average energy consumption might find more value in fixed deals, as the potential savings from avoiding a cap increase could be more substantial. Conversely, those with lower usage might find less benefit, especially if the fixed deal is significantly above the current cap and the autumn increase is less severe than predicted. The decision also hinges on an individual's appetite for risk and their preference for budget certainty.