Energy suppliers have NO plans to re-introduce cheaper fixed rates despite falling energy prices
Big energy suppliers have NO plans to offer customers cheaper fixed rate tariffs in the near future… despite the price they pay for energy going down
- Return of fixed tariffs could cut energy bills for customers
- Ovo is currently the only energy supplier offering one
- We asked the UK’s biggest energy firms if they planned on bringing them back
Energy prices are widely expected to fall from July, with the new cap to be announced by regulator Ofgem’s this Thursday.
Analyst Cornwall Insight’s forecast for the new price cap is £2,053 for a typical household in the period July to September 2023.
This would undercut the Government’s Energy Price Guarantee – the discounted rate most people are currently paying – by £447.
Customers have been facing sky high energy bills but this could be set to change with Ofgem’s energy price cap announcement
Currently, consumers are not impacted by the price cap due to the Energy Price Guarantee, which limits a typical household’s energy bill to £2,500 per year.
But starting from July, energy bills are set to fall below that and will revert to the price cap level.
Fixed tariffs used to be the norm, offering households bills substantially cheaper than the price cap if they signed up to a deal with a supplier for several years.
These disappeared over a year ago following the energy crisis. But with wholesale energy prices – the cost energy firms pay for the power they supply to customers – falling, This is Money asked the UK’s biggest energy suppliers if they had any plans to bring back fixed tariffs to help their customers save money.
Will fixed tariffs make a return?
There is already one fixed energy tariff available for customers in the UK.
Ovo was the first energy company to re-introduce a one-year fixed price tariff in March at £2,275 a year, £225 less than the Energy Price Guarantee.
To get this tariff you have to be a customer with Ovo already and there is a a £150 exit fee for dual-fuel or £75 for electricity only.
Customers who have already signed up may regret their decision, if the price cap does fall to a level cheaper than the tariff on Thursday. But other suppliers could see the new price cap and decide to offer fixed deals that undercut it, in a bid to win new customers.
This Is Money asked the UK’s biggest energy suppliers if they plan to follow suit and launch fixed tariffs.
What are fixed tariffs?
Fixed tariffs have a set price for the energy you use over a certain time period – often one to two years.
If your energy use goes up (or down) significantly, your monthly bills would change to reflect that.
A fixed tariff would give you the reassurance that any market and industry price changes would not affect you.
A spokesperson for Scottish Power said: ‘We currently have no plans to launch any new fixed price tariffs.
‘With the level of the price cap forecast to reduce on 1 July, existing customers who are on our standard variable tariff will automatically benefit from the associated price reduction from that date.’
Standard variable tariffs are an energy supplier’s ‘default’ tariff.
They are usually the most expensive gas and electricity tariffs, because suppliers can change the unit rate prices at any time, alongside the wholesale price.
If you’re on a standard tariff, the rates you pay are governed by a cap. That cap is currently set by the Energy Price Guarantee, but will likely return to Ofgem’s price cap on Thursday if it is cheaper.
EDF said it will continue to monitor the market and will launch fixed deals again when it’s best for customers.
It has an email alert you can sign up for to let you know when they have fixed deals available again, implying that they will make a return.
British Gas is not currently offering fixed tariffs, however it is accepting new customers. Customers may choose to switch provider even if they cannot get a cheaper tariff, for example if they are unhappy with the service provided by their current energy firm.
A spokesperson for British Gas added that when it does have fixed tariffs, it never has exit fees for internal switches.
|Tariff||With £2,500 price cap||If price cap is £2,053||If price cap is £1,975||If price cap is £2,055|
|Ovo 1 Year Fixed 23 March 2023 at £2,275||£250||-£222||-£300||-£220|
|Calculations based on Cornwall Insight’s final energy price cap forecast as at 19 May 2023|
Should customers consider a fixed energy tariff?
Customers should think carefully about switching to a fixed tariffs if they come back on the market.
They could save you money if energy prices stay high, but you could also end up paying more than the energy price cap if it continues to goes down.
Commenting on fixed rates, Cornwall Insight said: ‘We hope to see the reappearance of more competitive fixed-rate energy tariffs as prices begin to stabilise, providing consumers with additional options to manage their energy costs.
Uswitch suspect the reason we haven’t seen any other fixed deals available yet apart from Ovo is because other suppliers may be waiting for confirmation from Ofgem on the final price cap level from July 1.
They added: ‘Once this is announced on Thursday, we hope this will give suppliers confidence on numbers and the opportunity to begin offering fixes.’