Households stuck on costly energy deals as only ONE fixed rate is cheaper than staying put – but homes may still save by taking out two tariffs

Households are locked into expensive energy deals and can’t save money by moving – because only one fixed rate in 11 on the market is cheaper than Ofgem’s price cap.

Even then, the cheaper deal – from Utility Warehouse – has strings attached, as consumers will have to arrange other energy accounts through the company to get the best rate.

Currently, most homes in Britain pay energy bills that are limited by the price cap set by regulator Ofgem.

The price cap averages £1,834 per year from October 1 to December 31, and applies to households on variable energy tariffs who pay by direct debit.

Consumers are clamoring for the return of cheaper fixed-rate energy deals, but research from Future Energy Associates has shown these are in short supply.

There are only eleven fixed rate energy deals on the market for new and existing customers, only one of which is cheaper than a current capped price deal.

Future Energy Associates also found that there are as many as 337 pre-existing fixed rate energy deals that cost consumers more than they would pay on a variable rate basis – and many of these have expensive exit fees if customers want to leave.

The cheapest fixed rate deal is the Utility Warehouse Fixed Saver 7, which costs £1,775 until November 2024 – £59 per year cheaper than the average home pays on a capped rate.

However, that rate is only available if customers add two other energy bills to the package in addition to the energy deal.

Fiona Waters, spokesperson for the charity group Warm This Winter, said: ‘Anyone trying to find savings in the energy market is hiding from nothing. Even if you can navigate the complicated and confusing array of rates, there’s little in the way of real deals.

‘We have only found one fixed rate that is lower than the price cap, and there are conditions attached to it, because you have to bundle other energy bills into it to qualify. The government and the energy sector seem to think Britain’s broken energy system has been fixed, but households trying to find an affordable deal to get them through this winter know differently.’

However, consumers can still find cheaper energy prices than those offered by the Ofgem price cap.

Besides using less energy, consumers can save money on gas and electricity in two ways.

Firstly, they can get a fixed energy contract from their supplier that is cheaper than they currently pay.

There are two types of energy contracts with a fixed rate: those for new customers and those for existing customers only.

Energy companies don’t have to disclose the details of fixed rate agreements for existing customers – meaning you won’t see these rates if you shop around.

But your energy company may contact you with information about a special flat rate, which may be cheaper than the price you currently pay.

Secondly, consumers may be able to save money by taking out two energy contracts with variable rates, one for gas and one for electricity.

The cheapest variable rate Future Energy Associates has found for electricity is Fuse Energy’s Fuse Saver deal.

In tests carried out by Future Energy Associates, this deal cost the average user £878.27 per year, compared to £931.90 if they stuck to the Ofgem price cap – a saving of £53.63 per year.

Meanwhile, the cheapest variable gas tariff is the Home SVT October 2023 v1 deal, from Home Energy.

In the same tests, this deal worked out at £863.62 per year for the average household, compared to £914.50 under the Ofgem price cap – a saving of £50.88 per year.

However, these specific rates may not be the cheapest for you. This is because energy companies don’t always offer the same prices depending on where you live and a host of other factors.

How do I know if a fixed rate deal is a good deal?

To find out whether an energy deal is cheaper than you pay now, compare the unit rate and fixed charge with what you currently pay.

The average home pays rates capped by the Ofgem price cap, which amounts to 53 pence per day in fixed costs for electricity and 30 pence for gas, while electricity rates are 27 pence per kilowatt hour (kWh) and 7 pence/kWh for gas .

The huge variable is what happens to the Ofgem price cap in the future. It might be possible to get a cheaper deal now, but then you’ll see the price ceiling drop significantly, causing you to pay too much.

What is the future for energy bills?

Ofgem makes no predictions on how the price cap will change in the future, although chief executive Jonathan Brearley has previously warned customers that he can offer ‘no assurance that things will relax this winter’.

However, Cornwall Insight analysts make predictions about the price of energy bills that are normally very accurate.

Cornwall Insight believes the average household will pay £2,032 from January 1, falling to £1,964 in April, £1,917 in July and then rising again to £1,974 in October next year.

Big profits for energy suppliers

Energy suppliers will now make an extra £140 million profit on the country’s energy bills over the next 12 months, thanks to changes to Ofgem’s price cap from October 1, allowing energy companies to charge more to make up for previous losses.

The new rules mean businesses now make an average of £64.70 profit per customer per year, an increase of £4.70 per customer.

End Fuel Poverty Coalition Coordinator Simon Francis commented: “With energy prices in flux, customers should be extremely cautious when considering a switch and solution. We are calling on companies to waive exit fees so that people can easily switch to the cheapest tariff available.”