Power customers may soon switch back to a fixed-rate power tariff, according to experts at comparison company Uswitch.
Many are clamoring for lower rates as the average household is stuck paying £2,500 a year for gas and electricity at expensive variable rates.
But the return of flat rates doesn’t mean customers will be able to get the cheap deals they were used to before energy bills started skyrocketing.
Based on current price predictions, Uswitch has predicted that the repair would only save the average home £17.30 at best this year, and could even end up costing you £387.58.
No actual change? If prices for fixed-rate energy bills match current predictions, consumers won’t be much better off than they are now and could be stuck spending even more.
Cheap fixed-rate electric and gas deals were once the top choice for most households, but energy companies stopped selling new deals as energy prices began to skyrocket in 2021.
Uswitch said providers could now relaunch fixed-rate deals because the cost of wholesale power has dropped 60 percent since December 1, 2022.
However, he has estimated that any soon-launched fixed-rate power deals are likely to cost around £2,200 to £2,500 a year.
That price level means consumers are betting on what energy prices will do next. The Brits may find they save a small amount of money and then be forced to strike a deal that costs them hundreds of pounds more.
Uswitch director of regulation Richard Neudegg said: “We see no good reason why providers can’t start acting on lower wholesale prices and offering fixed deal options to power customers as soon as possible.” .
The comparison firm said 70 percent of households want a cheaper fixed-rate power deal, while 33 percent also value the appeal of fixed prices.
Uswitch’s predictions are backed by analysts at energy experts Cornwall Insight, who also believe fixed-rate energy deals are back.
Will a Fixed Rate Energy Agreement Really Save You Money?
Here’s what fixed-rate energy deals of £2,200 to £2,500 per year would mean for average household bills:
Currently variable rate power bills should be £4279 a year for average usage, the level of Ofgem’s price cap.
There are now 27 million homes on variable rate power deals and just 4 million on fixed rate options, Ofgem said.
In reality, that £4,279 figure is capped at £2,500 a year for most households due to the government’s energy price guarantee.
That energy price guarantee was to increase to £3,000 a year from April 1, but now reports suggest the government will keep it at £2,500 for the foreseeable future, an announcement that could be made in the budget. This week. The scheme will end in April 2024.
Along with this is the big question of what happens to Ofgem’s price cap for the rest of the year.
The price cap will drop to £3,280 a year from April 1. Cornwall Insight’s energy experts believe the price cap will then fall to £2,112.42 a year for the period July to September 2023 and then rise slightly to £2,118.13 for the remaining three months. of 2023.
These are just predictions, and no company is estimating energy bill prices beyond the end of 2023.
But if Uswitch and Cornwall Insight are right, customers won’t save money with any fixed-rate offers after April 1.
Setting it at £2,200 a year, right now, means a consumer would save money between now and April 1.
With current price cap predictions for July at £2,153, households will need to think carefully before committing to a fixed deal in the coming months.
Richard Neudegg, Uswitch
This is because energy bills are an average of £2500 a year, so a consumer would secure around three weeks of energy use at lower prices, saving around £5.76 a week, or £ 17.30 in total.
That consumer would then lose the equivalent of £87.58 a year from July to September, with losses falling to £81.87 for the last quarter of 2023.
But if the fixed rate offers are £2,500 a year, consumers will lose even more money – again, if current predictions are correct.
Someone who locks in at this level will not save or lose money before April 1, because their fixed rate offer is at the same level as the energy price guarantee.
But this consumer would then lose the equivalent of £387.58 a year from July to September, and then £381.87 during the last three months of the year.
With this in mind, choosing a fixed-rate offer in the near future is likely to be less about saving money and more about the peace of mind that comes from knowing that bills can’t go higher than a certain point.
Neudegg added: ‘With current price cap predictions for July at £2,153, households will need to think carefully before committing to a fixed deal in the coming months.
‘Some may want to ensure the certainty of a lower price sooner, before next winter, and others may wait to see what happens with the market.
“Energy providers must ensure that consumers can reap the benefits of a lower wholesale market by now returning to fixed offers.”
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