Energy prices may have fallen from this time last year but households still face paying more to fix their gas and electricity tariff.
Fixed energy tariffs have begun to return to the market as wholesale gas and electricity prices moderate.
It comes as many households have stuck with default deals in recent years and relied on the energy price cap for their bills due to a lack of choice on the market.
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Moving to a fixed energy tariff may be tempting to lock-in payments and provide certainty for.
But analysis by Cornwall Insight has found that households choosing to sign up to any of the fixed energy tariffs currently available could end up paying around £130 more on average than the projected April price cap.
The state of the energy market
The energy price cap is currently set at £1,928 per year for a typical household but is expected to drop by 16% to £1,620 in April, according to Cornwall Insight.
There are currently 35 fixed rate tariffs available in the market and the cheapest, based on average household usage, works out at £1,753 per year, £133 above the anticipated cap.
“After a slow comeback, fixed energy deals have started to attract more customers, with the guaranteed rates proving increasingly appealing to those seeking to protect themselves from further economic instability,” adds Mabey.
“With some fixed energy tariffs dipping below the existing price cap, it’s understandably tempting to sign up. However, there is a risk these deals might not translate to actual savings come April, when a significant decrease in the price cap is projected. It is important consumers weigh the immediate appeal of a slightly lower price against the potential for larger savings down the line.”
Is a fixed rate tariff worth it?
Increasing numbers of fixed rate tariffs are coming to the market.
A fixed tariff provides certainty and makes it easier to budget, but now may not be the time to fix with no deals below April’s expected price cap, meaning you could end up paying over the odds.
It could be worth waiting a few months to see if better deals emerge, depending on whether energy prices fall..
Mabey highlights that suppliers have little wiggle room to improve their deals until April.
This is because of the market stabilisation charge, which requires all domestic suppliers acquiring a customer to make a payment to the supplier that is losing the customer. This comes to an end on 31 March, and it is hoped more fixed price deals will be introduced following the end of the policy.
“Suppliers' hands are also tied by the ban on acquisition tariffs, preventing them from enticing new customers with cheaper deals than those on offer to existing customers,” he says.
“It is hoped that the end of the market stabilisation charge will be a turning-point for fixed energy deals. With this burden lifted, suppliers will have greater flexibility to offer competitive fixed price tariffs, providing much-needed stability and peace of mind for struggling households.”
Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and The i newspaper. He also co-presents the In For A Penny financial planning podcast.
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