HOUSEHOLDS should avoid fixing their energy deals with prices predicted to drop, experts have warned.
Customers could lose out on roughly £200 by taking out fixed-rate tariffs now, according to research from Future Energy Associates.
Households on fixed tariffs could end up paying more for their energy later this year
Energy bills have soared for millions after wholesale costs for gas shot up – the average household is paying £2,500 a year.
Prices were expected to rise even higher, but the Government stepped in and introduced the energy price guarantee.
Two providers, OVO Energy and SSE, have been offering fixed deals since March currently lower than the guarantee.
A fixed rate tariff means your unit price for gas and electricity doesn’t change for the period you have fixed for.
However, Future Energy Associates have predicted the rates being charged to customers on these tariffs now will lose out when energy prices are expected to fall from July.
Analysts Cornwall Insight are predicting energy prices from July to September will see the average household pay £2,064 a year for their bills when the energy price guarantee finishes.
But Future Energy Associates say customers who opted for an OVO fix from March will lose out by £212 and those on the SSE offer will lose out on £197 compared to sticking with the Government’s guarantee rate and then moving to a variable tariff based off Ofgem’s price cap from July 1.
Clem Atwood, from Future Energy Associates, said suppliers would be looking to “exploit consumer desires” to fix on lower rate tariffs.
She added: “Our analysis of costs shows that recent fixed tariffs are likely to make suppliers around 20% profit, whilst fixing customers at unit rates above the forecasted Ofgem price cap.”
Meanwhile, Ofgem, the energy regulator, said while it was “good news” there was “some choice” returning to the market, consumers should be wary of whether energy prices will drop in the future.
A spokesperson said: “Right now, we anticipate the next price cap will be lower, but future price cap levels remain uncertain.
“We know that some customers really value certainty and stability in what they pay for their energy – but everyone should be aware that if prices fall, customers on fixed deals may be locked into higher prices for longer.
“Customers should make up their own minds based on what matters most for them, and we expect suppliers to help explain the situation when offering these products.”
Simon Francis, of the End Fuel Poverty Coalition, a group of charities and campaigners, said: “The Wild West of the energy market is back, with energy firms trying to make a quick buck from people’s confusion with their energy bills.
“They are playing on the cost of living crisis to try and tempt customers onto a deal that offers security, but appears to come at a very high price to their pocket.
“People continue to be penalised by Britain’s broken energy system.”
OVO Energy also provides energy to SSE customers.
An OVO spokesperson said the figures from Future Energy Associates “misrepresented” the value of its fixed tariffs.
They added: “We are proud to be the only supplier that is giving its customer the option to fix their energy costs for the next 12 months, providing peace of mind and protection against the risk of future Price Cap increases.
“From speaking to our customers, we know that many want the security of a long term fix and this is what this provides.”
How can I avoid paying more?
If you’re on a fix and worried about paying more from July, what you can do will depend on when you took out the fix.
If your fixed-rate tariff is set to finish before July, you can always switch to a different one, such as a variable tariff, which could see you paying less.
You could also leave your fixed-rate tariff earlier, but bare in mind you might have to pay an early exit fee.
For example, OVO’s one-year fixed tariff has a £150 early exit fee if you are on a dual-fuel tariff. It’s £75 if you are just paying for electricity.
How can I save money on my energy bills?
As we head into summer, one of the obvious changes you can make is ditching your tumble dryer.
The appliance churns through energy at 85p an hour so it’s worth hanging any washing outside instead if you can – it could save you around £70 a year.
Even if you don’t have space outside, you can put your washing on a clothes airer and leave it by an open window.
Getting rid of any old halogen lightbulbs and opting for LED ones could save you around £55 a year too.
And keeping your showers down to four minutes can help slash energy bills and bring down water bills by £95 a year.
Meanwhile, depending on your circumstances, you might be entitled to a cost of living payment to help cover the cost of everyday essentials such as energy bills.
There are three payments in total, worth £900, £150-£300 and £150 which are being paid between now and Spring 2024.
Plus, you might be able to get help via the Household Support Fund – which was recently extended until March 2024.
What help you can get depends on where you live, as it is being distributed by local councils.
But, most of the time it comes in the form of a direct bank transfer or vouchers.
You should check with your local council to see if you are eligible for any help.
If you don’t know what local council area you fall under, you can use the Government’s council locator tool.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
