Can you beat the rise in energy bill price caps by getting a cheaper deal before October 1?
- Energy bills will rise to an average of £1,717 a year, but there is a way to save
Average household energy bills will rise by £146 a year from October 1, but it could be possible to beat the rises and save more than £100 by choosing a fixed tariff.
The average home currently pays an energy bill of £1,568 a year, for a deal with prices set by regulator Ofgem’s price cap.
But this will rise to £1,717, or 10 per cent, from October 1 for those on variable rate energy deals, regulated by the price cap.
But households may be able to avoid the limit and save money by taking out a fixed-rate energy contract.
All change: Ofgem’s price cap is about to change, causing millions of energy bills to change
At the moment, most energy deals are variable. That means they change the price, normally four times a year when Ofgem adjusts its price cap.
Fixed rates, as the name suggests, offer fixed prices for unit rates (the energy used) and fixed charges (daily fees paid regardless of the energy used).
Before the 2021 energy crisis, most energy deals had a fixed rate, with variable rates reserved for homes that had dropped out of a fixed contract and had not entered into a new contract.
If you can find a fixed rate that’s cheaper than the price cap that’s likely to come into effect in October (although in many cases it won’t), you could save money on your energy bills.
The current cheapest fixed rate energy deal is from Outfox the Market at £1,555 per year, or £162 less than the October 1 price cap.
| Energy company | Agreement | Average annual bill | Save at a price cap of £1,717 in October |
|---|---|---|---|
| Outsmart the market | Outsmart the Price Cap (October 24) Fix’d Dual v1.0 | £1,600 | £117 |
| British gas | Flat rate 12M v16 | £1,612 | £105 |
| Cooperative energy | Co-op 15M Fixed September 2024 v1 | £1,626 | £91 |
| Octopus energy | Octopus 15M Fixed September 2024 v2 | £1,626 | £91 |
| E.To next | Next gust 12m v11 / Next steady 12m v26 | £1,626 | £91 |
| Sainsbury’s energy | Sainsbury’s Fix and Reward Fixed 12m V26 | £1,656 | £61 |
| EDF energy | Energy Essentials Fixed 1 year Sep25v3 | £1,658 | £59 |
| Ovo energy | 1 year fixed August 28, 2024 | £1,660 | £57 |
| Cooperative energy | Co-op Community Power 15M Fixed September 2024 v1 | £1,691 | £26 |
| So energy | So sunflower fixed for 1 year | £1,705 | £12 |
| Source: Uswitch | |||
Beware of the obligations associated with fixed-rate energy contracts
Saving money by taking out a cheaper fixed rate may seem like a no-brainer, but there are some possible conditions attached.
First of all, all these numbers are just averages. If you use more energy, you still pay more with a permanent contract. This only determines the costs of each unit of gas and electricity that you use.
Secondly, many fixed rate deals come with expensive exit fees of up to £100 per fuel.
Even in the table above, five deals have exit fees of £50 per fuel (British Gas, E.On Next, Sainsbury’s Energy, Ovo Energy, So Energy).
Two have exit fees of £25 per fuel (Outfox the Market and EDF Energy), while the rest have no exit fees.
Exit fees can exacerbate the third potential problem with fixed interest rates: the fact that no one can predict the future.
All these solutions currently work out cheaper than a household would pay if the price ceiling were maintained.
But they also expect that energy prices will not fall further in the twelve to fifteen month period of the fixed term.
If energy prices fall, consumers may be better off switching to a cheaper solution, or perhaps even staying on a variable rate limited by the price cap.
Expensive exit fees could lock consumers into more expensive energy deals as it becomes cheaper to stay than to move.
However, energy prices are unlikely to fall until March next year, according to experts at Cornwall Insight.
Instead, they are likely to rise again when Ofgem resets its price cap on January 1, 2025.
There may be cheaper solutions available
There may be cheaper flat rate offers than those mentioned above, but they are hidden from view.
Uswitch has looked at solutions that are accessible to everyone, but energy companies are free to sell solutions only to their own customers and do not have to disclose these rates to the rest of the world.
If your energy company contacts you about an exclusive fixed rate, check how this compares in price to what you are paying now and what you would pay in October.
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