Should you fix your energy bill now to avoid the October price cap hike?

Energy bills are expected to rise by 9 per cent in just a few months, but households could save more than £100 by switching to a cheaper fixed tariff.

The typical household currently pays energy bills of £1,568 a year, under a deal with prices set by regulator Ofgem’s price cap.

This figure could rise by £146 to £1,714 a year by October, according to predictions by experts at Cornwall Insight.

But the good news is that it is possible to overcome any increase by setting a fixed interest rate.

This is because most energy contracts in the UK are on variable tariffs, where unit rates and daily fixed charges are limited by Ofgem’s price cap. This cap changes four times a year.

A fixed-rate energy agreement, as the name suggests, restricts unit rates and fixed charges regardless of what happens to Ofgem’s price cap.

If the fixed rate is cheaper than the one likely to come into effect in October (although many are not), households will save money on their energy bills.

Only one of the fixed-rate deals available on the market is cheaper than the current cap price of £1,568, let alone the £1,714 forecast for October.

However, with the price cap set to rise in October, some fixed-rate deals offer hope of reducing the £1,714 bills many households will face in a few months’ time.

Better still, these solutions help protect against further increases in energy bill prices that Cornwall Insight predicts for January 2025.

But there are some solutions that could allow households to save money on their expected energy bills, according to price comparison and switching company Uswitch.

All of the following offers are for 12 months and the exact rate will vary depending on your energy usage and where you live.

There may be cheaper energy offers available

One important point is that there may be cheaper fixed-rate deals, but they are hidden from view.

Uswitch has explored solutions that are open to everyone, but energy companies are free to sell solutions only to their own customers and do not have to disclose these tariffs to the rest of the world.

If your energy company contacts you with an exclusive fixed rate offer, compare their price to what you pay now and what you would pay in October.

Fixed energy rates are a gamble

Signing any fixed-rate energy contract involves taking a risk regarding how prices will evolve in the future.

This comes with some risks. For a start, there is no guarantee that the October price cap will be £1,714 for an average home, but we will find out on Friday 23 August.

Similarly, there is no guarantee that energy prices will continue to rise in January, as Cornwall Insight predicts.

A customer might sign up for a service that seems like a good deal now, only to discover they’ll be paying more in 2025.

There is a way to exit a fixed-rate energy contract early, but it usually involves paying an exit fee.

These charges can be exorbitant (up to £300 for gas and electricity) and often serve to lock in customers and prevent them from switching suppliers.

Richard Neudegg, director of regulation at Uswitch, said: ‘The price cap is expected to increase again in January, but payers can take steps now to ensure certainty about how much they will pay.

‘There are a number of 12-month fixed deals available at cheaper rates than today’s firm forecast, so shop around to see what energy tariffs are available to you.’