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- Many energy companies have agreements that lower Ofgem’s price cap from January.
The average home energy bill will rise to £1,738 from January, but it is possible to avoid the rise and save more than £140 a year by switching to a fixed tariff deal.
The typical household currently pays energy bills of £1,717 a year, based on an agreement with prices set by regulator Ofgem’s price cap.
This will increase to £1,738 from 1 January 2025, or 1.2 per cent, for those on variable tariff energy deals regulated by the cap price and using average quantities of gas and electricity.
But households can go over the limit and save money by signing up for a fixed-rate energy deal.
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).
Peaks and valleys: how Ofgem’s energy price cap has changed since 2019
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.
But if you can find a fixed rate cheaper than the maximum price, you can save money on your energy bills.
The ten cheapest energy deals range from £1,597 a year to £1,636.
The current cheapest fixed-rate energy deal is from E.On Next, for £1,597 a year, or £141 less than the peak price on 1 January.
| energy company | Deal | Term | Price | Savings against the January price limit | Departure fees |
|---|---|---|---|---|---|
| E.In Next | Next Fixed 18m v7 | 18 months | £1,597 | £141 | £50 for fuel |
| Outperform the market | Fixed Dual Nov24 v2.0 | 12 months | £1,606 | £132 | £25 for fuel |
| FED | Simply fixed 1 year January 26 | 14 months | £1,608 | £130 | £25 for fuel |
| British gas | Fixed Rate 18M | 18 months | £1,608 | £130 | £50 for fuel |
| Octopus | Octopus 12M Fixed November 2024 v2 | 12 months | £1,609 | £129 | None |
| Cooperative Energy | Cooperative 12M Fixed November 2024 v2 | 12 months | £1,609 | £129 | None |
| Outperform the market | 18 months fixed dual November 24 v5.0 | 18 months | £1,611 | £127 | £50 for fuel |
| E.In Next | Upcoming fixed reward days 12m v1 | 12 months | £1,620 | £118 | £50 for fuel |
| E.In Next | Next Fixed 12m v35 | 12 months | £1,620 | £118 | £50 for fuel |
| Sainsbury’s Energy | Sainsburys Fix and Reward Fixed 18m v6 | 18 months | £1,636 | £102 | £50 for fuel |
| 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 the figures above 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, six in ten deals have departure fees of £50 per fuel.
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 18 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.
Energy prices are expected to fall again in April and then in July, according to experts at Cornwall Insight, but the company has not yet said by what extent.
Cheaper solutions may be available
There may be cheaper fixed rate deals than those listed above, but they are hidden in plain sight.
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.
