Table of Contents
- Energy bills will rise to an average of £1,717 a year, but there is a way to save
The average home energy bill will increase by £146 a year from 1 October, but it is possible to avoid the increases and save over £100 by choosing a fixed tariff deal.
The typical household currently pays energy bills of £1,568 a year, based on an agreement with prices set by regulator Ofgem’s price cap.
But this will rise to £1,717 from October 1, or 10 per cent, for those on variable tariff energy deals regulated by the cap price.
But households can go over the limit and save money by signing up for a fixed-rate energy deal.
Everything changes: The price cap set by Ofgem is about to change, altering millions of energy bills
At the moment, most energy agreements are variable. That means they change prices, usually four times a year when Ofgem adjusts its price cap.
Fixed tariffs, as the name suggests, offer fixed prices for unit rates (the energy used) and standing charges (daily rates paid regardless of the energy used).
Before the 2021 energy crisis, most energy deals were fixed-rate, with variable rates reserved for households that had abandoned a fixed deal and not taken out a new one.
If you can find a fixed tariff cheaper than the peak price that is likely to arrive in October (although many are not), then you can save money on your energy bills.
The current cheapest fixed rate energy deal is from Outfox the Market for £1,555 a year, or £162 less than the peak price on 1 October.
| energy company | Deal | Average annual bill | Savings against October’s £1,717 peak price |
|---|---|---|---|
| Outperform the market | Exceed the price limit (October 24) Fix’d Dual v1.0 | £1,600 | £117 |
| British gas | Fixed Rate 12M v16 | £1,612 | £105 |
| Cooperative Energy | Cooperative 15M Fixed September 2024 v1 | £1,626 | £91 |
| Octopus energy | Octopus 15M Fixed September 2024 v2 | £1,626 | £91 |
| E.In Next | Next Burst 12m v11 / Next Fixed 12m v26 | £1,626 | £91 |
| Sainsbury’s Energy | Sainsburys Fix and Reward Fixed 12m V26 | £1,656 | £61 |
| EDF Energy | Energy Essentials fixed 1 year September 25v3 | £1,658 | £59 |
| Ovo Energy | 1 year fixed August 28, 2024 | £1,660 | £57 |
| Cooperative Energy | Cooperative community power 15 million fixed September 2024 v1 | £1,691 | £26 |
| So energy | So Girasol 1 year fixed | £1,705 | £12 |
| Source: Uswitch | |||
Be careful about the conditions imposed on fixed rate energy agreements
Saving money by taking out a cheaper fixed rate may seem like a no-brainer, but there are some potential conditions.
First of all, all these figures are just averages. If you use more energy, you will still pay more with a fixed contract, as it only fixes the cost of each unit of gas and electricity you use.
Secondly, many fixed rate deals carry expensive exit fees of up to £100 per fuel.
Even in the table above, five deals have exit fees of £50 per fuel (British Gas, E.On Next, Sainsbury’s Energy, Ovo Energy, So Energy).
Two have exit fees of £25 per fuel (Outfox the Market and EDF Energy), while the rest have no exit fees.
Exit fees can worsen the third potential problem with fixed-rate deals: the fact that no one can predict the future.
Currently, all of these solutions are cheaper than what a household would pay if they stayed within the maximum price.
But they also depend on energy prices not falling further in the 12 to 15 month period of the fixed term.
If energy prices fall, consumers would be better off switching to a cheaper solution, or perhaps even sticking with a variable rate capped by the price cap.
Expensive exit fees can serve to lock consumers into more expensive energy deals because it is cheaper to stay than to move.
However, energy prices are not likely to fall until at least March next year, according to experts at Cornwall Insight.
Instead, they are likely to rise again when Ofgem reinstates its price cap on January 1, 2025.
Cheaper solutions may be available
There may be cheaper fixed rate deals than those listed above, but they are hidden in plain sight.
Uswitch has discussed solutions that are open to anyone, but energy companies are free to sell solutions only to their own customers and are not required to disclose these rates to the rest of the world.
If your energy company contacts you to offer you an exclusive fixed rate, compare its price with what you pay now and what you would pay in October.
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