Will there ever be any good news about energy bills? As the energy price cap is announced and bills are set to hit ridiculous levels from October, you could be forgiven for giving up hope of ever getting an affordable bill again.
I recently tackled the energy crisis in my column a few weeks ago. For as long as this desperately unfair situation continues, I’ll do my best to help you find ways to save cash and understand how you can get help if you can’t pay or are in financial difficulties. For people who need information or help right now, you can find links to all the schemes, grants and obligations on energy firms on regulator Ofgem’s website here
This week, I’ve been receiving lots of calls and messages about ‘fixing’ energy bills. With big price rises on the horizon, many people are asking if they should agree to pay a set amount at a higher rate, because of widespread predictions of much higher bills in 2023. Here’s my guide.
Fixing energy bills – the pros and cons
Ordinarily, fixing a price that you pay for energy is a good idea, particularly if you are more cautious and don’t want to risk a ‘variable’ tariff where the price goes up and down depending on wholesale energy prices. In fact, millions of us were on fixed deals until the stratospheric rise of prices that began this time last year.
However, these are not ordinary times. There’s little difference in the tariffs offered by the energy businesses and little in the way of savings to be made by switching.
As a consequence, some energy firms are offering high to extremely high fixed term deals for people worried about prices getting out of control. If you are paying £1,500 a year now, but are worried about prices hitting £5,000 or more, the idea of fixing a deal at £4,000 might seem to be the lesser of two evils.
I have a number of concerns about this. For a start, no one knows definitively what will happen over the next six months, never mind over one year. Its possible prices could get that high – but millions of people won’t be able to pay them. A great deal can happen in the next few months, from Government intervention, new rebates, windfall taxes on businesses and more. That could leave you stuck on a much higher rate if the Government and energy firms agree a plan to force down prices.
In addition, MoneySavingExpert – who’s guide on fixing is indispensable – are reporting that some exit fees have increased tenfold. An exit fee is the price you have to pay to leave a contract early. This massive increase is a major concern and suggests to me businesses are seriously concerned about people trying to get out of these new fixed deals.
If you are contacted by an energy firm about fixing an energy deal, then don’t feel panicked in to agreeing. Ask them to email or post you the information so you’ve got time to think about the deal and seek advice. Remember the business has an obligation to help you if you can’t afford your bills now. The solution to this is not to corner you in to an even more expensive deal. 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 asking you to predict a very volatile future, anticipate support schemes and Government intervention, guess what the wholesale price for energy might be and do some rather complicated maths. That all adds up to a whole lot of risk for me. My colleagues over at MoneySavingExpert say that you should not fix at any more than 115% more than your current price cap – and even then, you need to be aware of all the risks I’ve mentioned.
Fixing isn’t the best option. But it is an option. 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.