Why fixed energy deals could leave you worse off

Households have been warned that signing up to a fixed-term energy contract in a bid to cut their bills could end up costing them more.

A number of suppliers have started offering fixed contracts to existing customers. But none so far has offered a significant saving compared to the new Ofgem price cap, which comes into force this Saturday lowering typical bills by 17%.

The energy price cap is expected to fall to £1,871 in October, and then increase slightly to £1901 from January, according to analysis by energy experts. With current fixed energy tariffs costing around £2,050, customers who choose to fix now could end up paying £179 more than the cap.

Greg Marsh, CEO of Nous.co, is urging most households to hold fire on fixing for now.  

Marsh said: “For most people a fixed energy deal is simply not worth it at the moment. Energy suppliers have begun encouraging their customers to fix with deals that seem alluring, but  part of the reason for this is that they’re promoting them just before the price cap falls, which inflates their savings number and makes them seem more attractive than they really are.

“Wholesale energy prices are still volatile and may fall further. Unless you really value certainty, fix too soon and you could end up stuck in an expensive contract. 

Nous is calling for energy suppliers to introduce more attractive deals for everyone, not just existing customers. It is also calling on Ofgem to remove the Market Stabilisation Charge so that suppliers have more incentive to compete on price. 

Marsh continues, “In the meantime, you can still save the better part of £150 a year without moving to a fixed tariff deal—provided you know where to look. (Hint: Nous.co is a good place to start!)”

Does it make sense for you to fix?

Nous recommends the following steps before opting for a fixed deal. 

1. Find out what the energy price cap change means for you using one of the free online tools such as nous.co/energycap. 
2. Decide if you value price or certainty. If you value certainty then a fixed deal slightly above or the same price as the cap might be worthwhile, but if you’re more interested in price then hold fire for now.
3. Think before you fix. Is it really a good deal? Consider the exit fees and the length of contract. During this time the price cap could go higher or lower depending on market conditions, so consider how long you would like to stay locked in for.

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