Price cap increases- To fix or not to fix?

Just an observation about fixing tariff at this time of year and following OVO's recommended DD's to attain a zero balance at your fix end.

Following that recommendation means that if you take a 1-year fix in autumn/winter then your account will almost always be in debit throughout the year.

ie. You start your new fix at zero balance, and because it's autumn/winter your ‘averaged out’ recommended DD won’t cover your monthly usage in those winter months.
So you immediately start to build up a debit - only catching up to zero again over the next summer as you approach plan end.

Of course if you fix in spring/summer than the opposite happens and you should build up a credit over summer that then covers your winter use and gradually reduces to zero..

I suppose it’s not really that important unless you don’t like your account always being in debit?
You could always ignore the ‘zero at fix end’ advice and (if you can afford to) pay more than the recommended DD to build up a credit balance.

Just to add a thought about how we send a consistent message to anyone asking the question of whether to fix or not. Can we have a simple flow chart that we direct customers to that gives the options. @BPLightlog made the very good point that for some people it isn’t about the small gain or loss you might make on either option it’s about not having to be concerned about the changes that occur every quarter. That should be the first box. Do you want the security of having a fixed rate? There can be notes further down to say that there is unlikely to be a significant difference between the SVT and Fixed Energy Deals for the foreseeable future [[ within this discussion - it is unlikely that energy costs will decrease significantly over the next decade for a number of long term reasons]]

Before delving further down the flow chart it would be useful to know if this is the approach that the company would like to present to their customers?

Peter

This doesn’t sound right. For a start, there’s no indication that ‘you’ have a zero balance at the start of the fix.

Second, you undertake when paying by DD to keep your account always in credit, so it’s not certain that the fix would be allowed to go ahead without an initial injection of cash. This comes as a surprise to some: when setting up a new DD, one month’s payment is taken immediately, with subsequent ones being taken on the date appointed. This will of course depend on how far ahead the appointed date is.

However you look at it, the scenario you describe is contrary to the account terms and would raise eyebrows.

It’s what happens in practice though, no eyebrow raising involved.

Despite the undertaking to keep your account in credit it happens simply as a consequence of the OVO aim of having you achieve a zero balance at a fixed plan end.
It seems that OVO are not bothered about a temporary debit balance if it’s a fixed plan, see below for why not

(I think we may have already discussed the various implications of that a while ago in the PZH forum?)

Think it through again:
If you are currently on a fixed plan and get it to zero balance at the plan end as intended by OVO then you will start a new fix with a zero balance.
If it's winter and your new plan DD is set at your projected anual cost /12 then your initial DDs will not be sufficient to cover your winter usage, and so a debit will build up initially and be paid off again by plan end.

Fixing when you already have a debit balance is not an issue either.*
That's because the existing debit balance gets factored in and collected over the fixed period to give zero at plan end.
Think of it as a 12-month debit repayment plan if you like, one that's added to your recommended DDs for your usage, and which increases your minimum DDs accordingly.

Similarly fixing when you have a credit balance.
The credit balance gets factored in and lower recommended DDs given to reduce it to zero at plan end.
Unless you pay more than the recommended minimum DD.

*PS. I fixed tariff last December despite having a debit balance of -£287 at the time, it was not a problem - and as you can see from this screenshot I am on target to have it paid off and achieve  zero balance by my plan end date this December.

However I think I’m going to hop to a new 12-month fix before then, I may even do it later today or tomorrow. If I do hop then I’ll let the forum know how that goes.

I decided not to hang about, and after a few last minute checks went for it.

I have now sucessfully done a 'tariff hop'* and switched to the 1 Year Fixed Loyalty 23/08/2024, my new plan/tariff starts at midnight tonight.

It was easily done over the phone, although it did take about 10 mins on hold to get to a person.
I'm on the priority services register, so usually get straight through and don’t have to wait at all.
However they are busy following the bank holiday, and with lots of people fixing and switching following the energy price cap announcement.

*It’s known as a ‘tariff hop’ because I have switched plans early, 4-months before my plan end, but as I'm switching from one Fixed Loyalty plan to another then there are no exit fees.

Although the new tariff doesn’t start until midnight things are already changing on my account online, including the recommended DD which has dropped from £134 to £112.

The new DD calculator graph shows very nicely what I have been saying above about fixing in winter.
There is about an -£80 outstanding balance today, and you can see here how at the recommended DD of £112 the debit increases during the colder winter months before coming back to zero at the plan end.

I think their notion of ‘healthy’ is very different from mine, or indeed from the spirit of the core terms.

 As I see it by ‘healthy’ they just mean not in (too much) debit at plan end, and what happens between now and then they are not too bothered about as long as it comes out ‘reasonable’ at plan end.

Personally I believe that the core terms statement is there more for legal reasons in the case of any problems, rather than meant as strict guidance.
T&Cs often contain ‘just in case things should get legal’ clauses and statements like that one.

thanks for everyones replies so far, i appreciate it

In looking for any risks relating to the ongoing war in Ukraine and the stopping of gas transit across the country at the end of this year (it appears that Europe has already come to terms with this happening) and I stumbled across this report from Cornwall Insight on their long term view of the electricity price trend up to 2030 which provides some more background on whether you Fix or stay with the Cap. It obviously doesn’t take into account a harsh winter or further developments in Eastern Europe or other short term issues.

I think the main takeaway is that prices are dropping slowly year -on-year but they are not going back to pre-2020 levels. Personally I don’t see much of a difference between a Fix and the Cap but at least a Fix gives certainty to your payments.

https://www.cornwall-insight.com/press-and-media/press-release/drop-in-power-price-predictions-up-to-2030/

Thanks for the reminder. I successfully switched to the August fixed tariff without incurring a termination fee by contacting customer support. However, the process wasn't straightforward. Initially, the representative told me that a termination fee would apply. I pointed out that when I joined in April, I received an email with terms and conditions stating that I could switch to another OVO fixed tariff without being charged a termination fee.

After a few minutes of checking, the representative confirmed that I could indeed switch without a termination fee, with the new plan taking effect tomorrow. I then received a new email titled "Your new fixed-rate plan will start soon." However, when I reviewed the terms and conditions in that email, I noticed that the clause about switching without a termination fee was no longer there. Instead, it now states, "If you joined OVO 1 Year Fixed on or after 19 August 2024." The terms and conditions seem to be dynamically updated, as even the link in the April email now points to the current version.