Should you fix your energy prices or stay on the price cap?

Last Updated: 15th December 2024

In a nutshell, "Yes! You should fix". In October 2024, energy prices increased by 10%, taking the average UK energy bill from £1,568 to £1,724 for gas and electricity. From January 2025, energy prices will rise by 1.2%, taking the average UK energy bill for gas and electricity to £1,738. Right now, energy suppliers are offering "fixed rate" energy tariffs with an average annual energy bill of £1,585, that's a saving of £153 or 8.8%. Crucially, it allows you to go through this Winter, which is expected to be colder than usual, paying less to heat your home.

Our expert says

"Looking at our own energy switching stats for November 2024, the average customer using our Ofgem-accredited energy comparison service saved an average of £122, with the largest saving being an eye-watering £1,591. "

- Scott Byrom, Chief Executive Officer

Before we go any further, we need to clarify that switching to a "fixed" energy tariff doesn't mean your energy bills won't fluctuate. The "fixed" aspect of the tariff is the unit rate and standing charge you pay. So, if you use more energy, your energy bill will increase. Conversely, if you use less energy, your energy bill will decrease. 

Looking specifically at the unit rates per kWh and standing charges applicable to Standard Variable tariffs under the Energy Price Cap, this is what the average customer will pay if they don't switch and fix: 

• Gas Unit Rate: £0.06 per kWh
• Electricity Unit Rate: £0.25 per kWh
• Gas Daily Standing Charge: £0.32
• Electricity Daily Standing Charge: £0.61 

If you do switch to a fixed-rate energy tariff, these are the rates you could be paying:

• Gas Unit Rate: £0.05 per kWh
• Electricity Unit Rate: £0.21 per kWh
• Gas Daily Standing Charge: £0.28
• Electricity Daily Standing Charge: £0.33 

To summarise against other types of energy tariffs, here are the four most common types of gas and electricity tariffs in the UK: 

• Fixed - the unit rate per kilowatt hour (kWh) and daily standing charge remain the same for the duration of the tariff, e.g., 1 or 2 years. 
• Variable - the unit rate per kilowatt hour (kWh) and daily standing charge can increase or decrease as market conditions dictate. 
• Capped - the unit rate per kilowatt hour (kWh) and daily standing charge can decrease but can't increase.
• Tracker - the unit rate per kilowatt hour (kWh) and daily standing charge can go up or down but will do so to a set amount e.g. 3% below the 'Energy Price Cap'. 

In addition to the savings available by switching to a fixed rate energy tariff, you also have the peace of mind that, should your consumption remain the same, you know what your monthly costs are going to be and, therefore, help from a budgeting point of view. 

It is important to note that energy prices are extremely fluid and can change rapidly based on various factors, including geopolitical issues and changes in the wholesale energy market, as we've seen in recent years with the conflicts in Ukraine and the Middle East. 

How long should you fix for?

This is a personal choice about how much reassurance you want about your energy costs. However, being realistic, given the need to rapidly increase investment in renewable energy and the infrastructure of our grid to handle this increase in electricity demand, energy prices are unlikely to fall. In fact, if you look back over the last 10 years, energy prices have increased by an average of 5% every year. 

Here you need to consider the premium you're paying to fix for longer (if that is indeed the case), how comfortable you are locking in your energy costs at that rate for the necessary period of time, and, should energy prices fall at some stage, what is the "exit fee" of the tariff to terminate the contract. These "exit fees" have increased significantly over the years an range from £50 to £200 per fuel i.e. £100 to £400 for a dual fuel (both gas and electricity) energy tariff. 

How to find the best fixed energy tariff?

Our quick guide for this would be:

1. Ensure you have a copy of your most recent energy bill to hand and identify your projected or estimated annual consumption in kilowatt-hours (kWh).
2. Visit an Ofgem accredited price comparison site (such as TheEnergyShop.com) to carry out your energy comparison.
3. Ensure that the tariffs are fixed and look at the term of the deal, e.g., 1, 2, or 3 years.
4. Check the applicable exit fees to see how much you would be charged if you switched energy during the tariff's term.
5. Visit websites such as TrustPilot to look at customer reviews for the gas and electricity supplier you have shortlisted. It's also a good idea to check out the energy supplier's Twitter feed to see what customers are messaging them about. You want to see good responses and look out for any trends, e.g., issues with call centre support.
6. Once you have picked your new energy tariff, you can switch energy suppliers through the selected price comparison website OR by calling the supplier directly. Some tariffs are exclusive to price comparison sites, though, so be careful not to be switched to something else, as energy supplier agents are paid a commission to switch you over the phone.

Ultimately, it's your call, but hopefully, this quick guide has conveyed our thoughts and opinions in a clear and useful way. As always, we're open to feedback and welcome readers to reach out to us and help us improve the advice we provide.