MILLIONS of households are being urged to carry out a quick energy check to slash their bills, but time is running out.
Energybills are set to rise from £1,738 to £1,849 per year under the new price cap announced yesterday by Ofgem, which comes into effect on April 1.
This will come as a blow to 22million households on standard variable tariffs, who will see average annual bills increase by £111.
However, households who use more energy than a typical home could still pay more.
This is because the energy price cap does not limit the total amount a customer pays for their energy.
Instead, it sets a maximum charge per kilowatt-hour (kWh) of gas and electricity, alongside the daily standing charges.
That said, households that act now by switching to a fixed energy deal could potentially lower their bills ahead of the increase, offering a chance to save money in the long term.
Fixed deals work to protect customers from bill hikes if Ofgem were to increase the price cap in the future.
Those who lock into a fixed energy deal are charged the same gas and electricity rates throughout the contract’s term.
There is a risk that if energy prices fall, you could end up paying more.
However, consumer champion and founder of MoneySavingExpert.com, Martin Lewis, said that households should not expect prices to fall back this year.
As a result, Martin warned that households cannot afford to be complacent, urging them to take action and fix their energy bills without delay.
How do fixed energy deals work?
FIXED deals work to protect customers from bill hikes if Ofgem were to increase the price cap in the future.
Customers on their supplier’s standard variable tariff see their energy prices change every three months, as these are tied to Ofgem’s price cap.
However, those who lock into a fixed energy deal are charged the same gas and electricity rates throughout the contract’s term.
Of course, doing so carries a slight risk of you paying more than those on the standard variable tariff if Ofgem’s energy price cap were to fall within your deal’s term.
However, this risk is minimal as analysts at Cornwall Insight predict that the energy price cap will only slightly to £1,756 a year from July.
From April, those on the standard variable tariff (SVT) will have their rates capped by Ofgem at the following levels:
- 6.99p per kilowatt hour (p/kWh) for gas
- 27.03p/kWh for electricity
- A standing charge of 32.67p per day for gas
- A standing charge of 53.80p per day for electricity
For a typical household that uses an average of 11,500kWh of gas and 2,700kWh of electricity every year, these rates will cap bills at roughly £1,849.
As this is only an estimate for a typical household, if you use more energy, you’ll pay more.
So, if you’re offered a fix that’s cheaper than April’s price cap, it’s always worth considering.
He said: “Sadly, no surprise, Ofgem announced what we’ve long warned you about.
“The simple answer is fix now to lock in a price cheaper than the current cap, which means it’ll be far cheaper than the cap once it rises in April.”
Martin warned yesterday that the cheapest deals currently available could disappear within 72 hours, making it crucial for households to act without delay.
For example, E.ON Next is currently offering the cheapest fixed energy deal on the market.
The supplier’s E.ON Next Fixed 15-month v1 tariff, which costs a typical household £1,649 per year, could save the average customer up to £200 annually compared to Ofgem’s April price cap.
Initially, this deal was exclusively available through the price comparison website MoneySuperMarket and was scheduled to be withdrawn from sale at 5pm on Friday, February 26.
However, E.ON Next has since confirmed that the tariff is now directly available to customers via its own website.
Kara Gammell, personal finance expert at MoneySuperMarket, said: “The latest price cap rise means it’s more important than ever to take action so you’re not paying more than necessary for your energy.
“This deal could save households £200 a year on energy bills, making budgeting your monthly and annual bills easier and offering protection from any future price hikes.”
How can I find the cheapest fixed deals
To find the best fixed energy deals, start by visiting price comparison websites, which aggregate various offers from different energy suppliers.
The best sites include Uswitch.com and MoneySavingExpert’s Cheap Energy Club.
Enter your postcode and current energy usage details to receive a list of available deals tailored to your needs – it’ll take you less than five minutes.
You’ll then be able to compare the rates, contract lengths, and any additional features or benefits offered by each deal.
Next, visit the websites of individual energy suppliers to check if they have exclusive deals that are not listed on comparison sites.
Sometimes, suppliers offer special promotions or discounts directly to customers.
Compare these offers with those on the comparison websites to ensure you get the best possible rate.
Finally, consider customer service reviews and the overall reputation of the suppliers.
Once you have identified the best deal, follow the instructions to switch your energy provider.
How can I check future price cap predictions?
EDF Energy has launches a brand new Ofgem price cap prediction tool on its website.
The energy company updates the tool with new information about changes to the cap on energy prices every Tuesday.
It also includes advice on how this affects your energy tariff choices.
You can find out more by visiting www.edfenergy.com/gas-and-electricity/price-cap-predictions.
What are the alternatives?
Customers unwilling to commit to long-term fixed energy deals may want to consider flexible tariffs.
Kara Gammell, personal finance expert at comparison site Money Supermarket Group, says: “These will almost always be at or below the price cap.”
For example, E.ON Next‘s Pledge variable tariff offers a fixed discount of around three per cent on the price cap rates for 12 months.
It will save the average household around £50 a year but comes with a £50 exit fee if you switch before the year ends.
The deal is available to both new and existing customers.
British Gas‘s Price Cap Guarantee and EDF Energy’s Ensure Tracker work in a similar way and also offer a £50 discount off the price cap’s charges for 12 months.
For a bigger reward but at a higher risk, Octopus Energy offers two variable tariffs which track wholesale gas and electricity costs.
Customers using the Octopus Tracker experience daily price fluctuations, but electricity rates have largely stayed below the price cap over the past 12 months.
For instance, over the last 30 days, households in southern England on the Octopus Tracker paid a maximum of 28.5p per kWh for electricity.
However, gas prices have generally been higher, with customers paying an average of 7.07p per kWh for gas.
The Agile Octopus tariff works similarly to the Octopus Tracker, but the main difference is that the former’s prices change every half hour.
Those wishing to switch to any of these tracker tariffs must have a smart meter.
What energy bill help is available?
There's a number of different ways to get help paying your energy bills if you're struggling to get by.
If you fall into debt, you can always approach your supplier to see if they can put you on a repayment plan before putting you on a prepayment meter.
This involves paying off what you owe in instalments over a set period.
If your supplier offers you a repayment plan you don’t think you can afford, speak to them again to see if you can negotiate a better deal.
Several energy firms have schemes available to customers struggling to cover their bills.
But eligibility criteria vary depending on the supplier and the amount you can get depends on your financial circumstances.
For example, British Gas or Scottish Gas customers struggling to pay their energy bills can get grants worth up to £2,000.
British Gas also offers help via its British Gas Energy Trust and Individuals Family Fund.
You don’t need to be a British Gas customer to apply for the second fund.
EDF, E.ON, Octopus Energy and Scottish Power all offer grants to struggling customers too.
Thousands of vulnerable households are missing out on extra help and protections by not signing up to the Priority Services Register (PSR).
The service helps support vulnerable households, such as those who are elderly or ill.
Some of the perks include being given advance warning of blackouts, free gas safety checks and extra support if you’re struggling.
Get in touch with your energy firm to see if you can apply.