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By Jo Thornhill
A spate of price cuts in the energy market in recent weeks has led many people to wonder whether it is better to opt for a fixed rate tariff or take a gamble on standard rates. Here’s a look at the options…
The Big Six energy companies have all announced price cuts to either gas or electricity (none cut both) in the past few weeks. Though the cuts were small, typically five per cent, they are welcome at a time when most households are feeling the pinch and winter bills are high.
Energy experts are now predicting further price falls could be on the cards before summer. This is because prices have been falling in the wholesale markets. Gas prices are down 20 per cent since September last year.
Consumers who opt to fix their bills now won’t gain from further cuts. But as Mark Todd at the energy comparison website energyhelpline.com points out many fixed-rate tariffs are actually lower than standard bills.
‘Consumers who have never switched before and are on standard rates, particularly if they are paying on receipt of the bill could make significant savings - even up to £200 in the first year – by taking a best-buy fixed rate deal. They’ll also have the peace of mind of a fixed rate.’
With the best fixed rate tariffs consumers have to agree to pay monthly by direct debit and the account is usually managed online – no paper bills are sent in the post.
The cheapest fixed rate tariff currently on offer is from OVO Energy. Its ‘New Energy Fixed’ deal works out at £1,059 for a typical household for one year. This is based on the industry standard measure of 16,500 kWh for gas and 3,300 kWh for electricity, paying monthly by direct debit.
By way of comparison the cheapest standard dual fuel rates are currently with EDF Energy at £1,203 – still £140 more than OVO’s fixed rate. The industry average standard dual fuel rate is £1,259.
Those who prefer to take a gamble on prices coming down further could save even more.
First Utility’s iSave V9 dual fuel deal would be £1,030 a year for the same average household. This is the cheapest energy deal currently on offer. It is not a fixed rate tariff. Customers must pay monthly by direct debit and bills are online.
People in existing fixed rate tariffs are being advised to stay put until their deal expires, despite recent price falls.
Joe Malinowski at TheEnergyShop.com says: ‘Most fixed rate deals taken in recent years are lower than standard rates so there is no benefit in switching. Fixed tariffs usually have exit fees during the fixed rate term, typically between £40 and £100 so this also has to be factored in.’
Some British Gas and Eon fixed price tariffs have started to look a bit expensive. Consumers with concerns should speak to a comparison service and get advice about the pros and cons of switching and how much they could save.
Switching energy supplier is easy.
Use a comparison website such as the one offered on our sister website thisismoney.co.uk to identify the best deal in your area and for your particular energy usage. You can then apply through the website or contact the new provider direct to apply.
The new provider will contact your old supplier and organise the switch. You do not need to do anything except take meter readings on the day of the switch. The whole process should not take more than four weeks.
It is important to note that the tariffs listed are correct as of 23 January 2012 but deals change on a regular basis.
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