Ofgem issues warning about fixing energy tariffs ahead of price cap announcement
The energy regulator said prices were still "unpredictable" and fixed rates might not end up as cheap as they appear over the term.
Fixed tariffs have begun to enter the market again after the end of the Energy Price Guarantee. Anyone who signs up to them will pay a guaranteed amount every month, which can provide some much-needed stability for some customers.
However, while a customer may sign up to a rate that's lower than the current energy price cap rate for the cost of a unit of electricity and gas and therefore it seems like a good deal, it is hard to predict how prices will change in the coming months.
If wholesale energy prices dramatically improve and the price cap drops during your fixed rate tariff, you might actually be paying more than if you'd stayed on the standard variable rate (SVR).
The SVR is the rate an energy provider puts customers on if they are not on another tariff. Suppliers have the power to put prices up or down, although they cannot go higher than the energy price cap.
Ofgem wrote in a tweet: "THINK BEFORE YOU FIX. Fixed-rate energy tariffs have seen a return to the market but check if they are right for you.
"Prices are still unpredictable and signing up for a fixed rate now might mean you miss out if prices fall in the future."
The energy price cap dropped to £2,074 from July 1, removing the need for the Government's Energy Price Guarantee which had kept bills from exceeding £2,500 while the fuel crisis was at its peak.
The next price cap announcement will be made on August 25, coming into effect from October 1 to December 31.
It's predicted to drop to £1,860 in October, before rising to £1,960 in January, according to analysts at Cornwall Insight.
Risks of fixing your energy deal
As NimbleFins previously reported, there are a few risks to consider when deciding whether fixing your energy deal is right for you - other than just the price changes.
If you move home it's unlikely you'll be able to take the fixed rate deal with you.
Energy suppliers also don't like it when you change the details of the person named on the bill, which is worth thinking about if you're in a less stable living situation, or you suffer a family bereavement.
If your energy supplier goes bust, or you get moved onto a prepayment meter, it's likely you'll lose your fixed deal. Read more about fixed energy deal risks here.
If you do want to fix your energy deal, you might want to ask about any exit fees you would have to pay if you left early.
Remember the energy price cap is not the maximum you will be charged for gas and electricity. The total is based on how much someone with a typical usage will pay. The price cap sets the rate for a unit of gas and electricity, and then the headline amount is calculated using the average usage over a year. If you use more than the typical household you will likely pay more than the cap.
NimbleFins has information on the average price of electricity per kWh in the UK so you can compare with fixed rates out on the market.
We also have research on the average gas and electric bill for UK households.
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