Another major energy supplier launches ‘UK’s cheapest’ fixed deal that’s £100 less than price cap – but is it worth it?
ANOTHER major energy supplier has launched a cheap fixed deal that is cheaper than the price cap from July.
Utility Warehouse is offering new and existing customers the chance to fix their energy bills at a cheaper rate offered to those on the standard variable tariff (SVT).
UW's new "Fixed Saver 1" tariff will allow customers to fix their energy prices at an average cost of £1,974.
For the average household, this will be £100 cheaper than sticking to the SVT which is pegged to Ofgem's price cap.
This will cap typical gas and electricity bills will be at £2,074 a year from July 1.
But customers wishing to sign up to Utility Warehouse's new fixed deal will pay the following rates for a period of one year:
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- 7.44p per kilowatt hour (p/kWh) for gas
- 30.55p/kWh for electricity
- A standing charge of 22.26p per day for gas
- A standing charge of 40.36p per day for electricity
And while the deal looks good on paper, there's a major catch.
Customers wishing to take up the offer are required to sign up for at least two other services offered by UW, such as mobile, broadband or insurance.
For most, this will be a costly exercise, making the overall savings from the energy tariff alone, pointless.
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Plus, if you already have a mobile or broadband contract and are mid-term, you'll face hefty exit fees to switch.
Packaged deals like this are often more costly, according to the UK's biggest price comparison websites.
But they do have their merits. Sarah Coles, head of personal finance at Hargreaves Lansdown said: "The power of bundling services is something that utility companies have built on for years.
"If they package up a series of products together in one bundle, you’re less like to switch any of them – even after prices have risen.
";If all the parts of the package offer good value for you, and you would be buying them separately anyway, then this could work out as a brilliant deal.
"However, you need to be careful not to saddle yourself with something you don't want – or paying more overall because you’re chasing a bargain for one aspect of the package."
It comes just days after So Energy launched a new 12 month fixed deal.
The tariff which is only available to new customers who switch on Uswitch.com will cap bills for the average household to £2,047 a year.
This works out to £27 less than typical bills expected under Ofgem's July energy price cap.
But Simon Francis, a spokesman for the End Fuel Poverty Coalition said that the group isn't "convinced" that these are particular great deals for consumers.
Ashton Berkhauer, an energy expert at Moneysupermarket, said: “We're watching the energy market particularly closely at the moment and working hard to bring our customers the best options for them once the market opens back up.
"Your existing provider may offer you a fixed tariff before the switching market reopens more widely.
"If you’re offered a fixed tariff, take a moment to consider if it’s right for you."
Should I take on a fixed energy deal now?
Customers who lock into a fixed energy deal are charged the same gas and electricity rates during the term of the contract.
This means that prices will stay the same throughout and customers won't face large bill hikes if Ofgem was to increase the price cap.
But you could end up being stuck paying more if prices fall in future so it's important to assess the real value of these offers.
From July 1, Ofgem will introduce the following new price cap rates for those on the SVT:
- 8p per kilowatt hour (p/kWh) for gas
- 30p/kWh for electricity
- A standing charge of 29p per day for gas
- A standing charge of 53p per day for electricity
For a typical household that uses an average of 12,000kWh of gas and 2,900kWh of electricity every year, these rates will cap bills at roughly £2,074.
But as this is only an estimate for a typical household - so if you use more energy you'll pay more.
If you're offered a fix that's lower than July's price cap, it's always worth considering.
However, before agreeing to a new fix it's important to understand that Ofgem's energy price cap will be reviewed again later this year.
The regulator used to set the price cap every six months. But since August last year, it now reviews the cap on unit rates for those on the default tariff every three months.
This means that annual energy bills may drop further into 2023 when the next price cap comes into force in October.
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Energy experts at Cornwall Insight expect typical bills to fall again to £1,959.58 a year from October but they could then rise again to £2,026 a year from January 2024.
If you're happy to stick to the standard variable tariff, we've calculated how much less you'll pay each month from July 1 depending on the size of your household.