Energy Guides

Capped energy tariffs: what to do if your fixed period is ending

Updated: 30 January, 2012

By Martin Fagan

If your household is on a capped or fixed energy deal that’s ending soon, we’ve got the information you need to switch to the best new tariff for you.

Last summer, each of the “big six” energy suppliers hiked their gas and electricity prices by around 30%, with the warning that rates were likely to rise again in the early autumn, Consumers that were worried about fluctuating prices were advised to “cap their energy” and “fix their prices”, many of which did.

But now, the majority of those fixed and capped deals are coming to an end and customers are in for a nasty shock if they don’t compare energy prices now and switch to the best new tariff for them.

• Capped tariffs explained
• When does your fixed period end?
• Beware the fixed price tariff traps
• Should you choose another fixed price tariff?

Following last year’s unprecedented price hikes, this year’s price cuts took many by surprise and may have lulled them into a false sense of optimism about the future direction of energy prices. Although this round of price movement has been downwards, history shows us that energy prices rise far more often that they fall. For example, in January 2006, the average household energy bill was £660 a year. Once all the price cuts come into effect, the average household energy bill will be £1,259 - an increase of 91% in seven years, says independent switching service, uSwitch.com.

So what should consumers on fixed and capped tariffs that are coming to an end do in the face of uncertainty about which direction energy bills will go in 2012?

Fixed and capped tariffs explained

Fixed energy tariffs work by guaranteeing that the price you pay per unit of gas or electricity will stay the same for a set amount of time. This is usually for 12 or 24 months.

You may choose to sign up to a fixed-price energy tariff to help you budget every month, or so you can avoid potential price hikes - with prices at a fixed rate, if the energy suppliers’ standard prices increase, your bills will remain at the same price as before.

However, if prices fall, you could end up paying more for your energy than other customers on the supplier’s standard tariff. Customers will also usually have to pay a premium for the guarantee of fixed prices, which means rates are normally fractionally more expensive than standard prices.

Capped tariffs are similar to fixed price tariffs, in that you pay a premium for a guarantee that your rates won’t increase above a set level for a set period.

However, capped tariffs usually promise to pass on any rate reductions that the supplier makes to its standard rates. So your bills won’t rise, and they could fall.

When does your fixed period end?

If you are on a fixed or capped tariff, it’s important to know exactly when the deal runs out, as you’ll need to prepare for the possibility of a sudden price jump when it expires. It’s possible to choose a new tariff and arrange for your new supplier to transfer you over on the day your current fixed or capped tariff ends, avoiding any higher charges from your current supplier moving you to a more expensive deal - and also avoiding any cancellation penalties.

Beware the fixed-price tariff trap

If you’re on a fixed or capped tariff that’s due to end soon, or even if you’re on one that’s not ending for a while, there are several things you should be aware of:

1. Beware early cancellation charges - Early cancellation charges are like exit penalties, and apply if you switch from your fixed or capped deal to another tariff before the fixed period ends. They are normally between £20 and £40 per fuel. If you are unsure if your tariff has early cancellation charges, ask your energy supplier.
2. Know the end date - It’s important you know exactly when your fixed period is due to end, so you can anticipate your switch and avoid having to pay more for your gas and electricity on your supplier’s standard tariff, or get locked into another deal.
3. Know the name of your tariff - All major energy suppliers offer fixed and capped tariffs with very similar names, so it’s important you know exactly which one you’re on when you come to compare prices. Check your bill for the exact name of your tariff and the date it ends, as energy suppliers tend to offer lots of different fixed tariffs with very similar names.
4. Know which tariff you’ll be switched to - If you don’t tell your supplier that you plan to switch to another deal after your fixed period has ended, most suppliers will automatically put you onto their standard deal. Standard tariffs are usually a lot more expensive than other tariffs on the market, such as online energy tariffs and discounted energy deals. However, it is worth checking with your supplier which energy plan you’ll be put on, as some suppliers switch their customers whose fixed deals have ended straight on to another fixed deal which may not necessarily be the cheapest deal for you. You may also incur early cancellation charges if you wish to switch to a better deal.

Switching to another capped tariff may not necessarily be the best option for your household - read below for more…

Should I cap/fix my energy again?

If you’re considering switching to another fixed price or capped energy tariff, you need to think about whether it’s the right option for your household, and whether it will save you any money on your gas and electricity bills.

As the future direction of the wholesale energy market is uncertain, it may be a good time to cap your prices again. However, as the market is volatile and energy prices unpredictable, it is worth looking at the cancellation charges of the capped tariffs and choosing one with cheaper charges, so if prices fall further you can switch should you need to move to a different tariff or supplier.

Other options include:

• Online energy tariffs - Online energy tariffs are normally cheaper than standard, “offline” deals, as suppliers don’t have the costs of sending out paper bills and you’ll manage your own account online.
• Green energy tariffs - Some green energy tariffs can be more expensive than conventional tariffs, however OVO Energy offers a green tariff that’s both environmentally-friendly and competitive in price.
• Social tariffs - If you’re over 60 and in receipt of a pension or benefits, you may be eligible for a social tariff from your supplier, which offer discounts for those that are vulnerable and struggle to pay their energy bills.