Major energy supplier launches new deal cheaper than price cap – should you fix?
A MAJOR energy supplier is offering a new fixed deal which is cheaper than the energy price cap.
Ovo Energy has launched a fixed tariffs for existing customers that is below the current £2,500 energy price guarantee.
The energy giant’s new deal is priced at £2,275 a year based on typical dual-fuel use – £225 less than the price cap.
Ovo, which has about four million customers, is the first supplier to bring back fixed energy deals.
It told The Sun it launched its new tariff because customers wanted “the security of a long-term fix to protect them against continuing energy price uncertainty”.
Fixed deals used to be cheaper than the energy price cap, but as wholesale prices soared, suppliers started upping them at an eyewatering rate.
So for the majority of households, it was cheaper to revert to a standard variable tariff, which is price capped.
However, experts recently predicted that cheaper fixed deals would start to make a comeback as whole gas prices started to fall.
Fixed-rate energy tariffs give customers bill stability over a set period.
Locking in the price means you can avoid bill hikes during that time. But you could end up stuck in a deal paying more if prices fall.
The majority of billpayers – around 26million – are now on standard variable tariffs that are subject to a cap.
The government’s energy price guarantee (EPG), has frozen average bills at £2,500 a year until June.
Experts are predicting that after this, the average bill could fall below this, to £2,200 from July.
But as this is only an estimate for a typical household – if you use more energy you’ll pay more.
Below we explain all the details of Ovo’s new deal, plus what you can do to lower bills now.
What is Ovo offering?
Ovo is offering a one-year fixed tariff priced at an average annual cost of £2,275 a year based on typical dual-fuel use.
But the deal is only available to existing pay monthly customers.
This means that if you pay quarterly or use a prepayment meter, you won’t be able to take advantage of the deal.
It is available through eligible customers’ online accounts.
But it’s important to note that if you leave the deal before a year is up, you will be charged an early exit fee of £150 or £75 for electricity only.
Ben Gallizzi, an energy expert at USwitch, said while it’s great to see Ovo offering a fixed-deal, it’s a shame not all customers will benefit.
He added: “The next step is for them [Ovo] to start promoting fixed tariffs to every household.
“We hope that Ovo’s actions will encourage the rest of the industry to start offering competitive tariffs of their own in a return for full-scale switching.”
Will other energy suppliers start offering fixed-deals?
We don’t know yet, but experts think this could happen.
Suppliers could currently be offering fixed deals costing between £2,200 and £2,500 a year for the average household, according to USwitch.
Ben said that competition in the energy market would give customers the change to find the supplier that best meets their needs.
He added: “When fixed deals return, consumers will need to weigh up whether signing up to one is the best option for their individual circumstances.
“Over the duration of a fixed deal, the price of the standard variable tariff (set by either the Energy Price Guarantee or the price cap) could increase or decrease depending on a number of factors.”
It’s worth considering whether switching to a long-term deal could help you with budgeting.
Energy expert Ben said: “One benefit of switching to a fixed deal is that it would give you confidence and clarity over what rates you will be paying for the deal duration, which has historically been between 12 and 24 months.
“Being able to lock in price certainty is a major factor when deciding whether to fix an energy deal, especially given how volatile the energy market has proven to be in recent years.”
But households shouldn’t just jump into a fix because it’s cheaper than they are paying now.
This is because prices could fall when further at the end of June when the energy price guarantee comes to an end.
Cornwall Insight’s research suggests that the average bill could fall below this, to £2,200 from July.
Ben added: “Considering the unpredictability of the energy market, no one can be completely sure whether sticking with a standard variable tariff or opting for a fixed deal will be cheaper in the long run.”
What can I do now to lower bills?
The best way to lower bills at the moment is to look at how you can be more energy efficient.
In the short-term there may be easy switches you can do, such as turning of energy guzzling “vampire appliances” or by tweaking your thermostat setting.
Small simple tweaks could save you hundreds of pounds.
If you’re struggling to pay your bill then you should ask your supplier for help, as they may have a fund that you can apply for to get discounts off your bills or to help pay off debts.
You could also get in touch with your local council to see what help it is offering under the Household Support Fund.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk