10th June 2013
Consumers are increasingly seeking out the best fixed price energy deals as fears rise that the UK’s six energy giants are set to hike their prices writes Philip Scott.
According to comparison site uSwitch, the warnings over price rises and the recent battle amongst Britain’s energy suppliers to offer customers the best fixed price deal, is reigniting people’s interest in fixing their energy prices against future increases.
The number of households opting for a guaranteed price is steadily increasing with three in 10 switchers, at some 29%, now moving to the security of a fixed price plan, compared to just 7%, last month.
Similar to a fixed-rate mortgage, fixed price energy plans allow consumers to safeguard against further energy price rises for a set period of time. It means that their price per unit of energy is fixed during this period – for anything up to just over three years.
Tom Lyon, energy expert at uSwitch, says: “Historically, fixed price plans used to carry a premium. However, we are now seeing tariffs that are fixed, but also qualify as a ‘best buy’. This is great for consumers as it means they get to enjoy a competitive price today, along with price protection for the future. With so much uncertainty about future prices and with bills already having hit an all-time high, this is doubly important and gives consumers even more reassurance that they are making the right move.”
Historically fixed price plans have come with a premium but this has now changed. In fact, fixed price tariffs now regularly appear in the energy ‘best buy’ tables, meaning that consumers can enjoy a competitive price today as well as price protection in the future says uSwitch. More importantly, some fixed price tariffs do not carry an early exit penalty, which is particularly important for consumers, especially when looking at a mid to long-term fix, as it means they are free to ditch their tariff at any point without being charged.
The fixed price landscape has changed so much in recent years that the cheapest energy plan on the market – Flow Energy’s Thames Fixed Online September 2014 – is actually fixed price. At £1,135 a year it is £218 a year cheaper than the average big six standard tariff for cash and cheque customers, of £1,353, and £130 cheaper than the average big six standard direct debit tariff, of £1,265. But cash and cheque customers would need to now pay by direct debit to benefit.
The fix on Flow Energy’s tariff expires at the end of August 2014. However, even slightly longer-term fixes can offer a good saving, along with peace of mind. EDF Energy’s Blue + Price Promise February 2015 protects against price hikes until 28 February, 2015. It has no early exit penalty and costs £1,192 a year, which is a saving of £161 against suppliers’ average standard cash and cheque price and a £73 saving against the big six suppliers’ average standard direct debit price.
The longest fixed price tariff on the market, npower’s Price Fix September 2016, also has no early exit fee and costs £1,318 a year. This makes it £35 a year cheaper than the average standard cash or cheque tariff says uSwitch. But it is £53 a year more expensive than the average big six standard direct debit tariff, although this small premium would be wiped out if suppliers hike their prices by just 4%.
Lyon adds: “Some also don’t carry any early exit fees, which removes any risk from fixing as, if prices do fall in the future, you can simply ditch your tariff and move to a better deal without incurring any penalties. This puts consumers firmly in the driving seat. It’s also important to stress that the ‘fixed’ element of a fixed price tariff is in the amount charged per unit of energy used. So if you are on a fixed price plan, but make your home more energy efficient, you will still save money.”