This year has not been a good time for homeowners because we have been squeezed from just about every angle. The recently announced price hikes from the ‘big six’ gas and electric companies (British Gas, Npower, Scottish and Southern Energy, Scottish Power, EDF Energy, and Eon) have pinched our pennies even further.
Every single one of the ‘big six’ energy companies has now announced huge price increases. However, with conflicting advice on whether to fix or switch, it can all get a little complicated.
A fixed energy tariff is when the price you pay per unit of energy is fixed by the energy companies for a set amount of time so it will stay this way whether the suppliers increases or reduces their prices. To try and simplify matters for consumers, we have listed the pros and cons of locking into a fixed gas and electric deal.
Gas and electric fixed tariff pros
Fixed unit price
It is important to note that it is the unit price that the energy supplier will fix – if you use more or less energy in one particular month your bill will be affected.
Consumers should be fully aware of the unit price before they fix because, once fixed, this unit price will remain the same for the remainder of the contract – usually 12 to 24 months, but sometimes up to three years.
Protected from price hikes
The great benefit of fixed tariffs is that the fixed unit price means you are protected against any price hikes by your energy company for the period of your contract. Even if your supplier was to double its gas and electric prices your fixed price would stay exactly the same, meaning that you won’t be left out of pocket.
Long term savings
If you assume that the price of gas and electric will rise, even if only slightly over the duration of your fixed tariff, you will save money in the long term. Right now we know that the energy companies have hiked prices and could have plans to increase them again at some point – if you fix before the next price increase you could make significant savings.
Gas and electric fixed tariff cons
More expensive than cheapest deals
If you are currently on one of the cheapest tariffs, perhaps an online tariff, you will probably find that fixing right now will cost you more. It is important to remember that your online prices are about to soar by around 19% – depending on your supplier and the date it plans to implement its increases.
Fixed tariff customers will find that they are paying a premium for the privilege of being guaranteed a fixed unit price for a certain period of time. This means that there will be far cheaper non-fixed deals available on the market. Although this doesn’t pose a problem if rates start to soar – it can put you at a serious disadvantage if they don’t.
Prices may never rise
Fixing your gas and electric tariff is always a gamble as (unless previously announced) the prices may never actually go up, and could even start to go down! This means that you could be left stuck in an expensive contract paying over the average for a long period of time, unless you pay the exit fee.
High cancellation/exit fees
When you lock into a fixed tariff you are contracted for the set amount of time, which will vary depending on what deal you have signed up to. If your circumstances change you might want to leave your fixed tariff and switch to a cheaper, more competitive deal. The luxury of having the freedom to switch to your preferred supplier does come at a cost; most fixed tariffs will incur an exit or cancellation fee for each fuel. These are usually quite substantial and often make switching to a cheaper deal worthless.
Should I fix my tariff?
The recent price hikes means that there aren’t many fixed tariffs on offer any more, so if you want to ensure that you are not left paying sky high energy bills this winter, you need to make a decision now. Don’t just contact your own supplier to fix your tariff, it is essential that you find a great deal, so compare the prices of gas and electric with all of the ‘big six’ and smaller companies before locking in.
As you can see, there are both pros and cons to fixing your gas and electric tariff – whether it’s right for you will depend on your current situation.
It is important that you really think about whether you want to be locked into a deal for the long term before signing any fixed tariff contracts because you will have to pay an exit fee to switch to an alternative provider.
Consumers also need to consider that leaving fixing too late could leave you paying a higher price per unit than if you fix earlier. The disadvantages of fixed tariffs could well outweigh the disadvantages in the current climate, but this will definitely depend on your ability to absorb the soaring energy prices. If you are concerned about the increase in the cost of your energy bill there are ways to help you cut costs further, such as using less energy and changing your payment method to direct debit.
