Energy prices have fallen - should you switch to a fixed energy tariff?

Average annual energy bills dropped by 17% at the start of this month after Ofgem lowered the energy price cap to £2,074, based on an average typical usage.

This is below the government’s now defunct Energy Price Guarantee (EPG), which between October and July limited the typical bill to £2,500.

Now that the energy price cap has replaced the EPG, it means that annual gas and electricity bills for a typical household will be around  £2,074 between 1 July and 30 September - though your actual bill depends on how much you use.

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With the price cap now lower, we are starting to see some cheaper fixed deals emerge - though they are primarily for existing customers.

Earlier this year, Ovo Energy started the ball rolling with a fixed deal, offering existing customers a deal below the EPG at £2,275 (based on average typical use) - meaning those who switch to its tariff could make an average saving of £225 on their annual bill.

And now Shell Energy, British Gas, Ovo Energy, Eon, So Energy, Utility Warehouse, EDF and Octopus have started offering fixed deals to new and existing customers that work out the same as, less than or just above Ofgem's price cap over the next year.

How much do new fixed-rate tariffs cost?

There are a number of energy providers now launching fixed energy deals. 

We’ve looked at what they cost.

Deals that are less than the energy price cap

•  Utility Warehouse’s Fixed Saver 1 for new and existing customers is the cheapest fix currently and gives an average bill of £1,895 a year – this is almost 9% less than the energy price cap. However, you do need to have at least two other services with Utility Warehouse (broadband, mobile or boiler and home cover) to get this energy fix. It has a £150 exit fee.  
• So Energy So Juniper tariff* (link takes you to a comparison from our friends at Go.Compare) gives an average bill of £2,047 a year based on typical use - this is 1% less than the energy cap. It is open to new customers and if you change your mind, it has a £150 exit fee. 
• Eon Next's one-year fix Next 1 Year v22 gives an average bill of £2,006 a year - again, this is just 1% less than the energy cap. It is for certain existing customers: customers must be those on a fixed deal that has ended or ends between 26 December 2022 and 18 September It has a £150 exit fee. 
• Shell Energy July 2024 v11 is a one year fix for all existing customers and gives an average bill of £2,065 a year - this is just 0.5% less than the energy cap. It has a £150 dual-fuel exit fee. 

Deals that are the same as the energy price cap

• British Gas’ Smart Aug24 v1 tariff offers a one-year fix to existing customers that gives an average bill of £2,072 a year. It also has a £200 dual-fuel exit fee.
• Eon Next's one-year fix Next Online v23 for new and existing customers gives an average bill of £2,074 a year and has a £150 exit fee.

Deals that are slightly more than the energy price cap

All of these deals are 1% more than the energy price cap but are still worth considering if you value certainty for your bill payments and rate the energy supplier for their customer service 

• British Gas one year fix called The Fixed One v23 is for new and existing customers gives an average bill of £2,099 a year. You'll need to get a smart meter installed if you don't already have one. It has a £200 dual-fuel exit fee.  
• Ovo Energy's 1 Year Fixed is for existing customers and gives an average bill of £2,099. This deal comes with a £150 exit fee. 
• Octopus Energy Loyal Octopus 12M Fixed June 2023 v1 tariff gives an average bill of £2,100 a year - and it is open to existing Octopus Energy customers only. If you change your mind, it has a £150 exit fee.
• EDF Energy Essentials Aug24 tariff gives an average bill of £2,100 a year - and it is open to existing and new EDF customers. You'll need to get a smart meter installed if you don't already have one. If you change your mind, it has a £150 exit fee.  

Analysis from the comparison site uSwitch found that 33% of consumers would prefer to have certainty and would switch to a fixed deal for it. Around 70% say they would like the option to switch to a fixed deal.

“It’s very likely we will see more tariffs being launched by energy providers and a return to switching, albeit on a much smaller scale, which will be another move in the right direction.”

Should you fix your energy tariff?

So far, there has been little incentive to switch suppliers as there have been no energy deals to switch to. And although they are returning, most are still only available to existing customers - except for the deals from So Energy British Gas, EDF and Utility Warehouse.

Right now, the cheapest deal is via Utility Warehouse - it is almost 9% less than the current energy price cap. 

Right now, the cheapest deal is Utility Warehouse’s - it is 5% less than the current energy price cap.

But whether you fix will ultimately be a gamble. Fixing can protect you from future price rises, but if prices continue to fall, then there is a risk you will end up paying more by locking yourself into a fixed energy tariff. 

However, following the price cap announcement, the regulator Ofgem has warned that customers should “think before you fix”. In a tweet it said: “With the lower #PriceCap figure, fixed-rate energy tariffs might appear back on the market, but check if they are right for you

“Prices are still unpredictable & signing up for a fixed rate now might mean you miss out if prices fall.”

Indeed, while fixing your energy could help protect you from future price rises, you should consider it carefully as energy prices could fall further and you may find yourself locked into a higher rate.

 Alternatively, Octopus Energy also offers a tracker tariff that offers gas and electricity prices at the wholesale price. It means you’ll see the amount you pay fluctuate each day, depending on what's happening in the energy market. However, it is only for existing customers. 

The analyst Cornwall Insight predicts the energy price cap for October to December will drop again to £1,960 (based on average typical use), then rise slightly in Q1 2024 to £2,026.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Those seeking alternative options to bypass the high cap prices through the return of fixed tariffs will need to manage their expectations, as the availability of deals below the cap is still uncertain.

“Even for those able to secure a below-cap rate, it remains a risky decision. There is a possibility that the cap could decrease, leading to consumers locked into higher-than-market prices.”