Should I take a fixed energy tariff now that they are more widely available?

Fixed rate energy deals are slowly returning, but households hoping to save money will be disappointed, as most are more expensive than sticking to a standard variable rate.

More than 80 per cent of households have variable rates, now averaging £2,074 a year.

Fixed rates have largely disappeared after October 2021, when energy prices started to rise.

Providers pulled these deals after dozens collapsed, leaving households no choice but variable rate deals, regulated by the Ofgem price cap once they fell off a firm deal or were redirected to a new supplier.

Energy costs are starting to stabilize. But they are still high and are expected to remain around £1,900 per home until March next year, according to Cornwall Insight analysts.

This has given energy companies the confidence to bring back fixed-rate deals, and there are now 275 in the market, according to an analysis for This is Money by start-up Future Energy Associates.

These flat rates have been launched by companies such as Ovo, EDF, British Gas and Octopus Energy.

Since the announcement of the energy price cap on May 25, 23 fixed energy tariffs have been launched. Most of these are for existing customers only and may also require a smart meter.

But of these, 16 are more expensive than a household would pay if they stuck with their existing deal with a price cap ranging from £2,301.20 to £2,076.

Seven is cheaper than Ofgem’s price cap, starting at £1,999 and going up to £2,065.02

The data looks at rates launched since May 25, as this was the point where Ofgem confirmed its price cap would drop by £1,206 to £2,074 a year for the average home.

That sharp drop was the first sign of stability in the energy market, even as prices remain high, and prompted energy companies to consider relaunching fixed-rate deals.

Taking out a fixed rate is a risk because it is difficult to predict what will happen to energy prices.

Consumer expert Martyn James said: ‘There aren’t many good deals right now, so hold on.

Prices are still volatile and confuse experts despite predictions of dramatic declines.

“Choose pragmatically what you’re willing to pay and if you’re not sure, don’t sign for more than a year.”

The energy deals offered with a fixed rate

The most expensive fixed fare was from British Gas, with its The Fixed One v23. That costs £2,301.20 a year for the average customer – £227 over the price limit.

The energy giant offered the cheapest solution for a short time, but was withdrawn due to demand. The exclusive fixed energy v29 tariff cost £1,949.46

Another expensive tariff is from Ovo, the most expensive of which, the 1 Year Fixed + Greener Energy 04 Jul 2023, would have customers paying an average of £2,199.49 per year, or £125 over the price cap.

Seven flat rates are cheaper than the standard rate limit of £2,074 per annum, with Ovo’s 1 Year Fixed + Boiler Cover 04 Jul 2023 being the cheapest at £1,999.47 per annum – a saving of £74 per annum.

Currently, no home pays more than £3,000 a year for energy.

That’s because the government’s energy price guarantee limits the amount the average household pays for energy to £3,000 a year. This promise lasts until March 2024.

After that, households pay the maximum price of an energy deal.

Watch out for exit fees

Exit costs can also be an issue for those looking to get under firm deals.

Many households can walk out of these deals penalty-free.

But otherwise costs start from £50 with Utlilty Warehouse’s Green Fixed 31 rate and rise to an eye-watering £400 for Ecotricity’s Summer Fixed Electricity and Summer Fixed Gas.

What the energy companies say

An Octopus spokesperson said: ‘We have reintroduced flat rates as soon as possible at the request of our customers – many of whom want to lock in their rates to provide additional security on their outgoing costs.

‘The price cap rates (standard variable rates or SVTs) have been capped for several months, while we purchase energy with a fixed rate at the current price.

“Energy prices are still volatile, so when we first offered fixed rates again, they were slightly higher than the ceiling – reflective of the energy price at the time.

“We have made all of this very clear in our communications with customers to ensure they are aware of all rate details and can make an informed decision.

“We are constantly reviewing our rates in line with wholesale energy costs to ensure we are able to pass on the best possible prices to our customers as quickly as possible.”

A spokesperson for Utility Warehouse explained that it has a cheaper flat rate deal for those who pay by direct debit, and the more expensive rate is for those who want to pay by cash or check.

They said, ‘It’s an industry standard that customers get a small discount if they pay by direct debit. Direct debit numbers are usually the reported figure as the vast majority of customers use direct debit to pay their bills.

‘Cash payment is mainly used as a backup for those who may default on their direct debit.’

A British Gas spokesman said: ‘We are offering our Fixed Aug24 v7 (same price as The Fixed One v23) which gives customers peace of mind of a fixed price for over a year, while the limit is only fixed until 30 September. 23. This is reflected in the price.

‘We do not offer fixed rates that are cheaper than the ceiling. We’ll let you know when we do.

“The Fixed One v23 & Fixed Aug24 v7 are available to all customers, new and existing (smart and non-smart).”

EDF Energy said: ‘For prepayment and monthly direct debit, EDF’s new rate is only £26 more expensive, so in line with other suppliers.’

Ovo declined to comment.