FIX UP
Martin Lewis says ‘there’s a lot of confusion’ as he explains energy bill dilemma that could save you 9%
Plus we reveal what's been happening with the energy market
MARTIN Lewis has revealed whether now is the right time to fix your energy bills.
It comes ahead of the energy regulator Ofgem's price cap announcement on Friday.
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Speaking live on ITV's Good Morning Britain (GMB) the consumer champion explained if bill payers should be looking to switch up their energy deal.
A viewer wrote into the show and asked Martin if they should be making the move now or to wait until the July price cap comes into force.
Martin said: "So, I think there's a lot of confusion here.
"The price cap dictates the price of standard tariffs, so the standard tariff will drop on July 1.
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"The main alternative tarrids being offered are fixes where you lock in - their price is not affected by the price cap."
He went on to explain that fixes move up and down based on the current supply that energy firms can get based on the current wholesale rates.
"Now, if you were to look ahead over the next year based on the current predictions, on average we would pay 3% less than now if you stay on the price cap - if the predictions are right - the cheapest fixes on the market are 9% cheaper right now," Martin said.
For that reason, the consumer expert says customers might want to lock in on the cheapest fix - but he warned to make sure you do a comparison.
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That way you can lock in now at 9% cheaper and get guaranteed rates for the next year.
He said: "That's cheaper than you'll be paying when it comes down in July and it's likely to be substantially cheaper than what the price cap will be over the next year.
"Of course, this could move if the world changes."
Something to bear in mind though is that most comparison sites just give you the current price cap, while really you need to look at the price cap over the next year to get the best view.
Martin concluded: "I would be looking at doing the comparison on the fix now and seeing what you can get - it's cheap fixes though.
"It's not about just locking in if you're going to lock in, lock in at a cheap price - don't lock in at an expensive price."
BEST FIXED DEALS
Average annual energy bills fell by 12% on April 1, for those on standard price-capped tariffs taking the average bill down from £1,928 to £1,690 a year.
Plus, bills are predicted to fall by another 7% in July when the latest change to the price cap takes effect, according to experts.
But that doesn’t mean bills won’t rise again during the next energy price cap assessment this year.
It also means fixed tariffs might creep up in price.
Martin Lewis' MSE has revealed that several of the cheap deals available right now.
The 9% fix that Martin mentioned on GMB comes from Ecotricity's
Green one year fix.
Although it does have £75 dual-fuel exit fees - plus you'll need a smart meter and must pay by fixed or variable monthly Direct Debit.
Outfox the Market's Fix’d Dual May24 is also a good option according to MSE.
It's 8% less than the current price cap, plus it doesn't have any exit fees.
The deal is available as dual-fuel only and you must manage your account online, but smart meters are not required.
Should I move to a fixed energy deal?
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 larger bills even if Ofgem were to increase the price cap.
But this also means that if prices fall, you could end up paying more than a new price cap.
This is the current price cap rates on a standard variable tariff:
- 6.04p per kilowatt hour (p/kWh) for gas
- 24.50p/kWh for electricity
- A standing charge of 31.43p per day for gas
- A standing charge of 60.10p per day for electricity
A typical household uses an average of 11,500kWh of gas and 2,700kWh of electricity every year, these rates will cap bills at roughly £1,690.
But as this is only an estimate for a typical household - so if you use more energy you'll pay more.
Any fixed offer that is lower than the current cap is always worth considering.
But be wary that annual energy bills may drop further into 2024 when the next price cap comes into force in July.
Analysts at Cornwall Insight predict that bills will drop again in July to around £1,574 a year, rise to £1,631 in October and dip again to £1,634 in January, but those are only estimates.
Plus, it's important to bear in mind that many fixed deals can come with hefty exit fees.
So if you're looking to fix make sure to compare those charges too.
What's happening in the energy market?
The UK energy market has been pretty volatile for the past few years, which has meant that energy prices have rocketed for customers.
Energy customers in the UK saw dramatic increases in their bills thanks to wholesale energy becoming more expensive at the end of 2021.
This was due to various factors like high gas costs, and low wind energy generation.
High wholesale prices and increased general market volatility resulted in suppliers taking deals off price comparison websites.
Increase in wholesale electricity prices caused by rising gas prices - if gas prices rise, the cost of producing electricity in these power stations rises and the cost of the electricity rises in turn.
But prices have dropped recently and the price cap has been reduced from £1,928 to £1,690 from April 1.
While this is a good thing, prices are still higher than they were this time two years ago.
The one constant thing about the energy market is its fluctuation so it's difficult to predict.
The next price cap from July to October is set to be announced in May and will likely be lower than the current one.
It means it can be hard to predict whether opting for a fixed deal or sticking with a standard variable tariff will work out cheaper in the long run.
Generally, it's a a bad idea to fix on anything higher than the unit rates or standing charges in your current deal, or for longer than a year.
By Ellie Smitherman - Senior Consumer Reporter at The Sun
Other alternatives
If you don’t want to commit to a fixed tariff it's always worth considering a variable tariff.
Kara Gammell, personal finance expert at comparison site Money Supermarket Group, says: "These will almost always be at or below the price cap."
For example, E.ON Next's Pledge variable tariff offers a fixed discount of around three per cent on the price cap rates for 12 months.
It will save the average household around £50 a year but comes with a £50 exit fee if you switch before the year ends.
The deal is available to both new and existing customers.
For a bigger reward but at a higher risk, Octopus Energy offers two variable tariffs which track wholesale gas and electricity costs.
Customers on the Octopus Tracker see their prices change daily, but unit rates have remained consistently lower than the price cap in recent months.
The Agile Octopus tariff works similarly to the Octopus Tracker, the main difference is the former’s prices change every half hour.
Remember that those wishing to switch to any of these tracker tariffs must have a smart meter.
How to find a good energy deal
To find a good deal you will first need to get an estimate of how much energy you are using every month.
It's good to do a meter reading regularly to track this or install a smart meter.
It is worth sending these to your energy supplier and checking your bill accurately reflects what you are using.
Next, you'll need to decide how much certainty you want over the price you pay.
You'll then need to choose a fixed or variable energy tariff.
To find what is right for you have a look at price comparison sites to see what is the best deal for you and how much you could save against your current deal.
Bear in mind these won't have every deal on the market so you still might miss out.
If you find a deal you like reach out to the supplier directly to see if that's the best price they can offer.
If you are looking to switch use an automatic switching service as they do most of the leg work for you.
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Meanwhile, millions of households could be forking out even less within months.
Plus, Martin Lewis has warned credit card holders to take advantage of a "core weapon" to avoid high-interest charges.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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