Ask our Expert

Should I fix my energy tariff?

Our expert says…

The dilemma of whether to fix your energy tariff is one that is facing many consumers at the moment - it can be a tricky decision to make:

What has happened to energy prices?

We have recently seen massive price hikes from EDF, British Gas (www.britishgas.co.uk), E.ON (www.eonenergy.com) and Scottish and Southern, which has resulted in the average British Gas customer paying an extra £261 a year for their gas and electricity. These increases have been blamed by energy suppliers on higher wholesale prices - electricity has risen by 66% and gas by 60% since last year. It is expected that price rise announcements from other major suppliers are imminent and furthermore, a second round of price rises are predicted next January 2009.

The future of energy bills?

In the short term it looks like energy prices will continue to rise, but what about long term? Well, it’s forecasted that by 2015 the UK will have lost 40% of its energy generating capacity due to the phasing out of almost all nuclear reactors and the closure of nine major coal and oil fired power stations.

If we were to build a new generation of nuclear plants, we would have to depend on the French as we sold off the only British-owned firm capable of constructing them two years ago. But even if the French were on board, the plants would not be built in time to plug the gap in supply. There are no immediate plans to increase coal and gas powered stations and serious investment in renewable energy still seems to be a number of years away. This means our dependence on costly foreign energy sources will greatly increase.

Fixing your energy prices

Even though future energy prices are likely to rise rather than fall, it doesn’t mean that switching to a fixed price tariff immediately is necessarily the best option.

Fixed (or capped) tariffs work by guaranteeing that the price you pay per unit will not rise for a set amount of time (usually 12- to 24-months). As well as helping you budget, fixing your energy costs protects you from future price increases. However, with the added security comes a premium - you will generally pay around 10% more than existing standard gas and electricity prices.

As for being tied into a contract, this is pretty much unavoidable as almost all fixed energy tariffs will charge an exit fee if you want to leave before the end of your contracted term. This is usually between £20 and £70 for each supply you fix. If you are worried about being tied down or believe that prices will decrease at some point in the future you can choose to fix your tariff for a shorter period of time i.e. fix for one year rather than three years.

Presently, only EDF Energy, British Gas and E.ON have launched post-increase fixed price tariffs, however Scottish Power (www.scottishpower.co.uk) which has yet to announce a price rise, recently launched its Fixed Price Energy Online tariff. This is currently the cheapest fixed rate energy deal in the market, fixing your prices until October 2009.

With price rises imminent from npower (www.npower.com) and Scottish Power, my advice is to fix your gas and electricity prices with Scottish Power’s Fixed Price Energy 2009 tariff. If this is unavailable sit tight and wait for the next bout of price rises, when new fixed rate deals will be launched and you will be in a better position to compare all supplier rates to get the best deal.

Be sure to check our energy news section for regular updates on new tariffs and price increases.

Ask us a question

If you have an energy query please email ourexpert@energychoices.co.uk