It might be time to fix your energy bill

The energy regulator Ofgem’s price cap will rise 10 per cent on October 1 to £1,717 for the average household, meaning it could make sense to switch to a fixed deal for the first time since 2021.

The cap, which is reviewed every three months and is likely to go up again in January, is not a limit on how much you pay. It is the maximum amount that suppliers can charge customers per unit of gas and electricity on their standard variable tariffs.

It is set at 5.48p a kWh for gas and 22.36p kWh for electricity until September 30, which for the average dual-fuel household paying by direct debit works out at £1,568 a year for average use. From October electricity will cost 24.5p per kWh and gas will cost 6.24p per kWh.

Wholesale energy prices are to blame for the rise, the consultancy Cornwall Insight said.

Should you get a fixed energy deal?

Before the 2021 energy crisis caused by a European gas shortage and Russia’s invasion of Ukraine, customers regularly switched suppliers and took out fixed deals.

But during the crisis 28 energy suppliers went bust as wholesale prices soared quicker than the price cap, which was reviewed twice a year. As the cap caught up, reaching £3,449 a year in October 2022, the government stepped in with a price guarantee that limited average bills to £2,500 a year between October 2022 and July 2023. Bills have fallen since, and the advice has been to stay on a variable rate as it has worked out cheaper than fixed deals.

Ben Gallizzi from the comparison site Uswitch said: “Now is a good time to look at what deals are available. The cheapest fix is £149 less than the expected price cap level from October and it could save you more money from January 2025, as further price rises are expected.

“We would encourage anyone who wants security over what they pay for the next 12 months to shop around and assess their options.”

Uswitch said there were ten fixed energy deals that cost less than October’s price cap of £1,717 a year.

The cheapest deal is the Fix’d Dual Aug24 v3.0 one-year tariff from Outfox the Market, which costs £1,568 a year. It has a £25 per fuel exit fee — so you would pay £50 to move both your gas and electricity to a different supplier before the deal ended.

Ovo Energy’s 1 Year Fixed 19 August 2024 costs £1,627 a year. It is only available through the comparison sites Uswitch and Confused and has a £50 per fuel exit fee.

Before fixing, you need to consider that some fixed deals could mean you would be paying more between now and October 1. You would also be taking a chance on the price cap still being higher for the remaining eight months of the deal. The cap often falls in April and July when there is less demand for energy.

• Compare energy deals

What’s the long-term forecast?

The consultancy BFY expects Ofgem’s price cap to rise again to £1,720 in January and remain there in April, before dropping to £1,690 in July 2025. If you stayed on the price cap for the next 12 months and those predictions were accurate, the average annual bill would be £1,702.

Bear this number in mind when looking for a fixed deal as anything costing more is likely to be more expensive than the price cap.

You might want to chose a deal that let’s you switch without a big fee in case this prediction proves too pessimistic, so you could consider Octopus or Co-op Energy, which both have £1,628-a-year deals with the added bonus of no exit fees. They would give you a £73 saving over the latest forecasts.

• I was charged £61,520 for one month of gas

Gallizzi said: “Before signing up to a new fixed tariff, check you are happy with the price, duration, and the exit fees, as it has to be the right deal for you.

“If you want to be in a flexible position to take advantage of cheaper deals that may arise over the next year, then choose a tariff where you can leave your contract early without charge or for only a small fee.”

Any big savings on fixed tariffs are unlikely, because Ofgem has kept in place a ban on better deals for new customers. This ban was introduced in April 2022 as a way of stabilising the energy market, because so many suppliers that had offered unsustainably cheap deals to bring in customers had gone bust. The ban will stay in place until at least March 2025.

Are there any reasons not to fix?

Apart from the risk of fixing at too high a price, penalties can ruin any savings from a cheaper deal if you have to exit the tariff early. So be aware of this if you might have to move house within the next year.

You cannot switch tariff or supplier if you have been in energy debt for 28 days or more. That could restrict a lot of households — Ofgem said the value of outstanding energy debt reached a record £3.3 billion in March.

How else could I cut my energy bill?

Economy 7-type tariffs give you cheaper electricity at off-peak times of the day. Traditionally this would give you cheaper electricity for seven hours overnight, but more modern smart tariffs are available, such as Octopus Energy’s Agile Octopus, which sends you an alert via your smartphone when energy prices are cheaper. You will usually need either an Economy 7 meter or a smart meter.

These tariffs are good for those who work night shifts or have electric storage heaters that heat up overnight. You need to make sure you use enough of your energy at off-peak times to outweigh the usually higher cost of peak-time energy though.

They are also good for electric vehicle owners, because you can charge overnight at a cheaper rate. All the big energy suppliers offer tariffs for EV owners, with Ovo Energy the cheapest at 7p/kWh when charging your electric car. Charging a typical 60kWh electric car battery would cost only £4.20, compared with £14.70 under the October price cap.

Can I get any help with rising bills?

The chancellor, Rachel Reeves, has abolished pensioners’ winter fuel payments from this year, so only those on pension credit are eligible for the payment, which is worth up to £300.

But the government estimates that as many as 880,000 families who are eligible for pension credit do not claim it. Those who get pension credit are entitled to an automatic £25 payment for each seven-day period of very cold weather from November 1 to the end of March 2025.

• How to save money on your energy bill

Households can cut their bills by reducing their usage or making their homes more energy efficient. You can get free loft, cavity or solid wall insulation which can normally cost thousands of pounds through the Great British Insulation Scheme. It has installed insulation into 12,200 homes since it began in April last year.

It is open to those whose homes have an energy performance certificate rating of D or below. This is a measure of energy efficiency, where A is best. Most UK homes have a D rating. The scheme is also restricted to those in council tax bands A to D in England or A to E in Scotland and Wales. Insulating your loft can save you £340 a year on your energy bills if you live in a detached house, according to the Energy Saving Trust, an advice website. You can apply through gov.uk and your energy supplier should contact you for an assessment.