Are energy bills going to go up or down? That’s the big question in the news this week, as different energy consultancies battle to predict the future.
On one hand, the Government’s Energy Price Guarantee (EPG) ends in April. This means bills will no longer be limited to an average of £2,500 a year. This Government cap will rise to £3,000 and operate for a year. In addition, the Energy Bills Support Scheme (EBSS) is due to end in April too, so the monthly discounts (currently £67 a month) will end in March. Lots of vouchers for people on pre-payment meters have not been claimed by the way, so if you are affected, contact your electricity supplier. This means bills will rise in real terms by 20%. MoneySavingExpert have a great guide to the Guarantee here.
Yet many organisations are predicting price drops too. How can two things be true at the same time? Well, firstly, no one knows anywhere definitively what’s going to happen over the next few months. However, most of the energy specialists I’ve spoken to expect wholesale energy prices to drop by July, which in turn could result in something unthinkable – the possibility of switching to a better deal.
If prices drop, do I fix?
Because of rumours about price drops, I’ve been receiving lots of calls and messages about ‘fixing’ energy bills. Fixing is where you agree a set price for energy for a set period of time. Fixes have tended to range from one year to five years. But you are committing to pay that amount for that whole period, even if prices drop significantly – and there are exit fees for leaving the contract early.
Fixing energy bills – the pros and cons
Cast your mind back a few years and fixing a price for energy was a good idea. Back then, millions of us were on fixed deals until the unbelievable rise of prices that began this time last year. In 2023, as Government support begins to be scaled back, being on a ‘variable’ tariff might be a concern for the more risk adverse.
If prices do drop by July, then it’s likely that businesses might compete to offer the ‘best’ rates for potential energy switchers. However, don’t rush in to a deal.
Last year, when it looked like energy prices might top £5,000 a year, some energy firms offered the option of long-term fixes at huge rates – effectively trapping people in to very expensive deals. On top of this, they also dramatically increased the size of exit fees – in some cases raising prices ten-fold. The moral is that some energy firms will look to the future and predict what deals work best for them, rather than what might be better for you. So check the details of the deal before committing. As it was, when the Government Price Guarantee came in, these bigger deals were largely wiped out. But that support is ending – and you’ll have to pay to leave a bad fixed deal in the future.
If you are considering a fix, then ask the energy firm to email or post you the information so you’ve got time to think about the deal and seek advice. If you are with the same energy firm, don’t forget though that the business has an obligation to help you if you can’t afford your bills now. The solution to this is not to offer you a deal that you can’t afford. This is potentially mis-selling and you should make a complaint if you felt pressured in to agreeing.
Ultimately, deciding on whether to sign up to a fixed deal right now is basically having a crack at predicting a volatile future, pre-empting support schemes and Government intervention (don’t get your hopes up), guessing what the wholesale price for energy might be and do some rather complicated maths.
Fixing isn’t necessarily the best option. But it is a potential way you could save. Just make sure you fully understand all the risks before signing up.
Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist.