With energy prices rising a fixed tariff is a good option, but should you fix for a long time?
Energy price rises are in the news again, with four of the six major suppliers announcing price hikes of 9.1% on average. Many people who feel they already pay over the odds for their gas and electricity will be concerned at the idea of paying even more this winter. However, there are still ways to protect yourself from the rises.
The best course of advice is to grab a fixed price tariff. A fixed tariff guarantees your rates won’t increase during a set period of time, protecting you from any market increases during the period. Most suppliers offer a range of fixed term deals at the moment, with some extending for periods as long as three years or more.
Go short...
The question is should you opt for a long-term fixed deal or a short-term option?
For those of you that want to see the greatest savings immediately there is no debate, a short-term fixed deal is the better option. The cheapest fixes available are generally running into early 2015, which would provide quick savings but would leave you exposed to inflated prices once they expire.
Here are the current cheapest fixed tariffs on the market:
|
Supplier |
Tariff |
Average Cost |
Average Saving* |
Notes |
|
first:utility |
£1,172 |
£248 |
Fixed until May 31, 2015, £30 cancellation fee per fuel if switching before end of fix |
|
|
E.ON |
£1,178 |
£242 |
Fixed for 12 months, £10 cancellation fee applies if switching before end of fix |
|
|
EDF |
£1,183 |
£237 |
Fixed until March 31, 2015. No cancelation penalties |
[SPOTLIGHT]*Based on a typical dual fuel tariff costing £1,420 (Source: Ofgem). All costs are for a yearly average usage dual fuel household paying by monthly direct debit. Average usage defined by Ofgem as 16,500 kWh p.a. of gas and 3,300 kWh p.a. of electricity. Data correct as of 30/10/13
However, with prices predicted to rise year-on-year, the long-term fixed tariff could see considerable savings for consumers who wish to protect themselves long-term. Here is a breakdown of what would happen if the average current bill of Ofgem rises by 9.1% in the coming years.
|
Year |
2013 |
2014 |
2015 |
2016 |
2017 |
|
Amount |
£1,420 |
£1,549 |
£1,690 |
£1,844 |
£2,012 |
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...or go long?
The current long-term fixed tariffs that are available start at around the £1,340 mark, so while you will be seeing a modest £80 saving on an average bill in year one, in year two you will potentially be seeing a saving of £209. In year three the savings could be £350 if prices rise by 9.1%. So for the first three years of the tariff you could possibly save a total of £639! As you can see, the incremental savings derived from choosing such a long-term tariff could be substantial.
Here are the current top long-term fixed deals on the market, with fixed dates lasting three years or greater:
|
Supplier |
Tariff |
Average Cost |
Average Saving* |
Notes |
|
EDF |
£1,340 |
£80 |
Fixed until March 31, 2017. No cancellation penalties |
|
|
ScottishPower |
£1,350 |
£70 |
Fixed until December 31, 2016. £25 per fuel cancellation fee applies if switching prior to the end |
|
|
npower |
£1,367 |
£53 |
Fixed until December 31, 2017. No Cancellation penalties. |
*Based on a typical dual fuel tariff costing £1,420 (SourceOfgem). All costs are for a yearly average usage dual fuel household paying by monthly direct debit. Average usage defined by Ofgem as 16,500 kWh p.a. of gas and 3,300 kWh p.a. of electricity. Data correct as of 30/10/13
The important advice to remember, in a constantly fluctuating energy market, is that a fixed tariff is the safe and prudent way to go. People looking to insulate themselves from future price rises should look to fix as soon as possible.
See if you could switch and save on your gas and electricity bills