Price cap increases- To fix or not to fix?

How’s the wind generator doing? Are you getting much from it? 

I’m 95% sure that I’m not going to fix again just yet, small 5% doubt because the OVO fixed loyalty does look borderline interesting.
(I need to do a bit more number crunching on that, and get out my crystal ball).
Edit- I did fix after taking another look at the numbers, time will tell if I made the right decision or not.

The unit rates are expected to drop in April so I thought I’d look again then, but I hadn’t heard about that possible situation with the SC which may change my thinking.

I was fixed for a year with SSE on a triple deal, electricity, gas, and broadband.
But that ended just as the prices started going crazy and the new fixed deals offered at that time were few and seemed too high, so I went on variable tariff for energy. (and put the broadband on BT’s social tariff saving £10 a month over what I had been paying SSE, and £20 over what they wanted for it ongoing).

Well I’ve done some quick calculations, and like I say it is borderline for me.

Using the Cornwall Insight predictions then even with the higher SC I’d be paying slightly less for electricity over the next 12 months on SVT that with OVO Fixed Loyalty.
(I’ve left gas out of things for now).

But it is very marginal and calculates at only £11 difference over the 12 months, If I use slightly more or slightly less electricity than this year then it could swing either way.
(Or if the Cornwall predictions are out of course).

Crystal ball time again.

So essentially for me it becomes a question of how much do I value having 12 months certainty of tariff?

I’ll do my calculations again, and for gas as well, but I’m now changing my mind and it’s about 50/50 on whether to take the Fixed Loyalty rates I’ve been offered.

I’m in Cumbria, but whilst there are regional differences in tariffs those differences aren’t that big.

PS ‘Cornwall Insight’ is a company, they are based in Norwich and AFAIK have nothing to do with the county of Cornwall (or Cumbria).

‘Big’ is of course relative. The standing electric charge for a Liverpudlian is 62% higher than for a Londoner (£227 a year compared to £140). Unit rates don’t vary so much, but even so, the average 4-bed Londoner would pay £80 more a year than a similar Yorkshireman (£1219 compared to £1139).
  

History of Cornwall Insight

The result of this survey might be predictable, although the fact that standing charges follow a different regional variation than unit rates complicates it considerably. I’m sure my Liverpudlian exemplar would like to see standing charges standardized across the country, but I doubt the Londoner would. It’s not an unreasonable concept, though; it costs just the same to send a Christmas card from Penzance to Falmouth and from Penzance to Lerwick (I think), so why should it cost more to send electrons further? 

It’s not quite the same with unit rates, though, and the absence of market forces doesn’t make it easy to find an equitable system. Is there a big difference in the price of a pint of milk in Inverness and Cardiff? Or a litre of petrol in Ullapool and Dover? I don’t know, but I shouldn’t be surprised either way. 

Yes, it’s difficult to make predictions, especially about the future.

I don’t really consider the leaving penalty, if you are fixing then you fix for the full term.

One other thing that is now swinging me towards fixing at the offered loyalty rates is actually nothing to do with the rates themselves.

By fixing I wouldn’t have to put up with them wanting to increase my DDs to inflated levels every 3 months and then having to get on the phone and argue them back to a reasonable level.
(When you fix the only variable becomes your estimated usage for the period of the fix).

I do have a debit balance to pay off from the transfer from SSE, my balance will be about -£150 after Decembers DD is paid, but as I am currently paying around £50 a month more than my usage it’s on track to clear that completely by the end of March.
If I fix now then what remains of that (ie, the -£150) will get spread over the next 12 months instead, but I don’t see that as an issue.

Timing can be important when fixing, especially if you have a debit balance like me then you want to fix when your existing balance is at it’s lowest. which will be the day or day after your DD has been paid in.

"Looking ahead to the second 2024 cap period (April-June), Cornwall Insight anticipates an 8p per day increase in electricity standing charges, influenced by the ongoing reform of network charges."

https://www.energylivenews.com/2023/11/16/energy-price-cap-to-rise-5-in-january/#:~:text=Energy%20consultancy%20Cornwall%20Insight%20has,a%20typical%20dual%20fuel%20household.

I haven’t seen anything that Cornwall Insight incorrectly assumed the consumer debt charge was going on the standing charge, all the ofgem documents mention the debt costs going on the unit rates for the very reason that the standing charge is already high... but of course i can't be certain. This is an ofgem document for example.

As Cornwall Insight say there is nothing clever in their estimates, they use data and calculations that are in the public domain. These get more accurate as they approach each ofgem calculation point.

The shifting of network charges from unit rates to standing charges will continue unless ofgem and the government decide otherwise. This is both the Transmission costs ie National Grid ESO or Distribution costs ie your local DNO.

Not only are the costs shifting from unit rates to standing charges, there is an awful lot of upgrades needed for net zero to connect and distribute all the renewable power and increase the capacity in the infrastructure for all those heat pumps, EVs etc.

Also in the past the costs for connecting a new generator was bourne by the generator so appeared in their costs and fed through in their unit rate. This shifted so some costs are bourne by the network operators and will appear on the standing charge.

You can see the start of all these changes in the graph I posted. TNUoS for Transmission costs and DUoS for Distribution costs.

One alternative of course is to reverse this decision and put these costs back onto unit rates.... I can't see any government shifting the costs to general taxation 

Yes, it’s been happening since I was moved from SSE to OVO.

As an example the last time they wanted £164 a month, (dual fuel), I argued it down to £150 and as I say that is currently on target for zero balance at the end of March.
So it isn’t difficult to see which one of us had the more correct calculation.
(OK I accept that the new January 2024 rates would alter that, but at the time of the calculations both of us had to calculate using the rates announced at that time).

I believe it happens because they tend to calculate the new DD’s just days before my DD is paid, and so the previous months usage is added to the calculation as ‘debt’.
(It’s also my belief that that is the cause of the phantom 13-months DD calculations we sometimes hear about, the 13th is the current, not yet paid, months balance added as a debt to the coming 12 months).

I have now decided to fix for the next 12 months at the Fixed Loyalty rates.
So a U-turn from my first post in this thread.
I’m now weighing up whether to do that on my next DD date or next monthly bill end date, there’s currently a couple of days diference. I’ll probably do it on DD day when the outstanding debt will be at a minimum.

As you note that does mean that the remainder of my outstanding balance gets spread for another 12 months.
I calculate that my new DD on the fix should be around £130 a month. (Dual Fuel), It will be interesting to see what OVO calculate.

PS. I have read the Ofgem review discussion paper, interesting if you have the stamina to read it.

@Firedog @Nukecad did you consider the 2 year fix?

@Jeffus I had looked at it but the rates were higher than the Fixed Loyalty plan rates that I had beeen offered.

However just looking again online the Fixed Loyalty rates have changed/increased from what I was originally offered.

I wasn’t aware that an offered ‘fixed’ plan could change rates like that, but thinking about it I suppose it does make sense and that it’s only fixed once you actually sign up.
Time to recalculate.

Even so I think that in the current climate with tarifs 2 years is a bit too long to fix.