The market for gas and electricity is in trouble. Many people are paying twice as much as they did a year ago, and an even bigger increase is expected in October.
So, you might be asking yourself: “should I fix my energy prices until 2023?” And today, you will learn everything you need to know to answer that.
Why Would I Need To Fix My Energy Expenses?
First, lowering your gas and electricity costs doesn’t prevent your energy bill from fluctuating based on how much energy you typically use. For example, if you build a few loungers and a heated swimming pool in your yard, your energy use and thus your costs will increase.
When you refer to fixing energy rates, it means that you specify the unit rate you are charged for the energy you consume as well as, as is typical nowadays, the standing fee you pay every day.
Right now, it’s pretty difficult to say if you should fix your energy bills. The power industry is quite unpredictable, and everything changes.
Some people might be able to fix to avoid the projected price rises in October, but there are no certainties at the moment, owing to market volatility. Others will think it’s wiser to go with the provider’s standard variable tariff (SVT) and take advantage of the price cap.
In case you didn’t know what a tariff is, these are employed to limit imports. They raise the cost of products and services bought from another nation, making them less alluring to domestic customers.
Understanding how a tariff impacts the exporting nation is crucial since customers there may be less likely to buy imports as a result of the tariff’s price increase. The tax has, however, basically increased the cost to the customer in another nation if the consumer chooses to purchase the imported goods.
Different Types Of Energy Tariffs:
- Fixed – For the length of the tariff, the unit rate and standing fee you pay per kilowatt hour remain the same.
- Variable – Depending on the state of the market, the unit rate and standing fee you pay may increase or decrease.
- Capped – You can pay a lower unit rate and a standing fee but not a higher one.
Why Should I Fix It Now?
Here are a couple of reasons why it’s a good idea to fix your energy prices:
- It makes you relaxed and metally at peace. You won’t have to stress about it in the days to come.
- Doing so will enable you to pay to repair it right now.
- You want to hedge your bets and lock in as early as possible for the upcoming two to three years.
- Your current provider must have an exclusive deal they can give to keep your bills low.
You could predict that there will be several tariffs on the market that could be fixed until 2024 and might be a wise choice for those wanting (and able!) to make one.
The only significant short-term drawback is that you will pay more over the following six months than if you remained on a Standard Variable tariff.
If you decide to fix it, you are strongly advised to transfer to a provider with flexible rates. As a client, you can take on insolvent energy suppliers, watch out for exit fees, and make a comparison to ensure you are fully aware of the expenses you will spend.
Is It Cheaper To Fix Energy Prices?
Would it be cheaper? The answer to this varies from yes and no. It all depends on the current state of the market. Both domestic and business energy prices are affected by the rise and dip of global trade.
So, maybe instead of finding a cheaper energy supplier, it would be best to apply on a non-fixed contract.
There are suppliers that can adjust the energy prices and base the prices on the current market trends.
The answer is no, though, as Standard Variable prices are now the least expensive gas and electricity tariffs available by a significant margin.
Fixing your energy expenses won’t save you money. More broadly, if wholesale energy costs fall when things get back to normal, it can be feasible to locate a lower variable tariff since energy suppliers are less vulnerable and can swiftly pass on price increases to you, the consumer.
When things are going well, you profit from lower energy prices, but the moment things start to go wrong, you’ll see a rise in costs.
The best way to determine whether it is more cost-effective to lock in your energy costs or switch to variable rates at a particular time is to compare energy prices using a site authorized and accredited by Ofgem.
But if you can afford to do so and want security against future price spikes, it would be best to fix your energy rates. Otherwise, wait it out and continue to pay your suppliers’ Standard Variable pricing.
How long should you fix for?
It’s common for people to decide to repair after more than a year. When your current energy tariff expires, there could be plenty of affordable energy offers available to help you continue to save money on your home energy costs.
This is because the market is active and competitive enough. Energy tariffs may provide set unit prices for 1, 2, or 3 years, but you may end up paying more and missing out on bigger savings in this case.
Additionally, it’s quite probable that you will be locked in for this by paying additional early termination penalties (also known as exit fees) to prevent you from transferring to another provider during the duration of that arrangement. When making your final choice, keep in mind that these might cost as much as £100 per fuel.
What Happens If My Fixed Tariff Is Due To Expire Soon?
You are one of the fortunate ones if your energy tariff is currently fixed. Prices won’t increase until after the fixed rate period has ended. Your provider will let you know when your fixed agreement is about to expire and will then switch you over automatically to their usual variable rate.
This will enable you to change to another contract if you so choose, but for the time being, remaining with the normal deal is probably the least expensive choice.