Should I fix my energy prices to save money?

In light of the latest government announcement, should you fix your energy prices?

Should I fix my energy prices right now?
(Image credit: Getty images)

With the energy crisis dominating the headlines, should I fix my energy prices is an important question to ask yourself.

Many households are concerned about how much their energy bills will cost (opens in new tab), especially if prices continue to rise. Before the crisis, fixing your energy tariff was a great way to protect yourself from increasing energy prices and help you budget. For the duration of a fixed-price energy tariff, the price you pay per unit of energy won’t change. 

There are many complex reasons why energy prices are going up (opens in new tab),but while prices have been soaring, many fixed-rate tariffs were removed from the market, and any that remained were more expensive than the increased energy price cap (opens in new tab) that came into effect in April 2022. 

While former Chancellor Rishi Sunak announced a £15 billion cost of living support package, including a £400 energy rebate (opens in new tab) to help families cope with rising bills, energy prices continue to rise, putting more pressure on already stretched household finances.

But with the Energy Price Guarantee (opens in new tab) effectively taking the place of the energy price cap, does this affect whether you should move to a fixed deal or not?

Should I fix my energy prices?

Right now it is best not to take any action when it comes to your energy bills. If you're on a fixed-price tariff that it coming to an end, you will be moved onto your supplier's default tariff, which means you will benefit from the Energy Price Guarantee.

Fixed price tariffs were withdrawn from the market when the energy crisis hit. The few that cropped up were significantly more than the price cap. Some people fixed in the hope of avoiding further price cap hikes. 

It is not yet known whether suppliers will start to offer fixed rate tariffs cheaper than the Energy Price Guarantee. 

Use the calculator below to see how your energy bills could change if any further price cap changes are announced. 

Fixed-rate tariffs have traditionally been popular as they protect households from energy price rises. If you’re on a fixed rate tariff, changes to wholesale gas and electricity prices won’t affect what you pay. A fixed tariff fixes the price you pay per kilowatt hour (kWh) of energy for the duration of the plan. It doesn’t mean your bill will be the same each month – that will depend on how much energy you use.

In normal market conditions, fixed tariffs often work out cheaper than standard or default tariffs.

Sarah Broomfield (opens in new tab), energy policy expert at Uswitch.com said: “Fixed energy tariffs are traditionally the best value deals on the market, but this all changed when the energy crisis began last autumn. The rise in wholesale energy prices has meant that it is untenable for suppliers to offer deals at the rates they had been. This resulted in the price of fixed tariffs increasing drastically." 

What happens if my fixed tariff is due to expire soon - should I fix my energy prices again?

If you’re currently on a fixed energy tariff, that is due to expire soon, then it's best to do nothing. You will be moved on to your suppliers default or standard variable tariff and be protected by the Energy Price Guarantee.

Energy policy expert Sarah Broomfield says: “When your fixed deal is due to expire, your supplier will notify you and then automatically roll you on to their standard variable tariff. You will be free to switch to another deal if you wish to do so, but staying on the standard deal at the moment is most likely the cheapest option.

Whatever tariff you’re on, your bill will be impacted by how much energy you use. So, the key is to try and use less energy.

What should I do if I fixed my energy prices before the Energy Price Guarantee was announced?

If you are on a fixed price tariff, don't panic.  You won't necessarily be stuck paying a really expensive rate and most will be able to benefit from the energy bill freeze. 

If you fixed before the Energy Price Guarantee was announced, you should see a discount applied to your bills from 1 October. It will be applied automatically, so there is no need to apply. 

You can expect a discount of up to 17p/kWh for electricity and up to 4.2p/kWh for gas. The end result means that most people on fixed rate tariffs will be paying 10.3p/kWh for gas and 34p/kWh for electricity from 1 October, which is the same rate as those on standard variable tariffs.  If you are on a fixed rate tariff that means you pay less than those rates, then your current deal will continue until the end of the fixed term. 

Most suppliers are making contact with their customers, so check to see if your supplier has written to you by post or email to find out more about how your specific circumstances could be affected. 

Is a fixed energy tariff worth it?

In normal times, a fixed energy tariff protects you against potential increases in energy costs. But you won’t benefit if prices fall. Being on a fixed-rate tariff can help you manage your household budget. This is because the rate you pay per unit of energy won’t change. 

But now, the Energy Price Guarantee is in effect. Those on standard variable tariffs will see their bills frozen at £2,500 per year (based on typical use). But remember, this isn't a maximum amount you could pay - this is based on typical use. If you use more than the 'typical' amount, you will like pay more, and if you use less, you will pay less than £2,500. 

If you're looking to keep your energy bills as low as possible, it's important to know how to save energy at home (opens in new tab), and whether you might be able to benefit from a tariff that offers cheaper electricity at night (opens in new tab).

Video of the Week