Customers on variable tariffs (SVT) are being notified these days of tariff increases from 1 January. At the same time, many are being given the opportunity to switch to a fixed-rate tariff. I am trying to decide whether it would be a good idea to fix, but I’m not sure I have all the information I need. Gas hasn’t been invented yet in my corner of the world, so I’m only interested in electricity tariffs.
Cornwall Insight are a well respected crystal-ball gazer where energy prices are concerned. Their predictions for 2024 show small ups and downs in unit prices, but one startling forecast is for a hike in the standing charge of the order of 15% on 1 April. For a light user like me, this is hugely significant. On SVT, the standing charge would amount to 37% of my bill in January, but by October this would have risen to more than 41%. The fixed rates I’m being offered would keep the standing charge at more or less the current level, so that makes fixing look like a good idea.
… I don’t see the point in wavering now just because someone else’s guesses have changed.
I’m fairly sure that CI’s guesses are closer to the truth than anything I could ever come up with. In particular, I think that their Q2 forecast for unit rates is likely to be close to whatever Ofgem settle on in just a few weeks’ time. My rationale for fixing was based on estimates that have changed significantly, and the new figures indicate that what might have been to my benefit before is no longer so advantageous. It’s a fairly safe rule that the most recent prophecy is more likely to be right than earlier ones.
The last time I fixed my rates, for two years, it was just before the price cap went into orbit in 2021. That saved me an awful lot. Let’s see how we go over the next year.
You will usually find there is a very short window before suppliers pull tariff if wholesale prices go into orbit due to a dramatic world event.
So you may still be able to catch that sort of risk if you are lucky and quick.
We are now down to wholesale gas prices well below even the start of the Ukraine conflict. It is not yet clear how low they will go though. As you see gas prices were on the way up in 2021 well before the Ukraine issues were even envisaged.
The uncertainty at the moment is around the standing charges more than the unit prices.
That affects low users more than high users
It can get very speculative just which way SCs will go, and if any change to SC will also mean an increase/reduction in unit rates.
With a looming election quite a bit in the next year (not just energy pricing) is going to come down to political wishes and electioneering promises. (Which may or may not happen).
The uncertainty at the moment is around the standing charges more than the unit prices.
That affects low users more than high users
It can get very speculative just which way SCs will go, and if any change to SC will also mean an increase/reduction in unit rates.
With a looming election quite a bit in the next year (not just energy pricing) is going to come down to political wishes and electioneering promises. (Which may or may not happen).
Unless OFGEM change the rules, then the Standing Charges are definitely going up this year, the charge increase is already baked in due to the previous ofgem change to move some network costs, both transmission and distribution, to Standing Charges. In hindsight perhaps not the best move.
As is stands, unit prices are still going down on 1st April unless we see another spike in the next few weeks. Much of the unit price for 1st April is already baked in and we haven't had another blip yet since the last Cornwall Insight estimate. This is the wholesale price today, the lowest in nearly 4 months. The lower prices over the last few weeks bake in lower costs in the price cap up till 15th Feb. Any change after the 15th Feb doesn’t impact the 1st April cap, it simply feeds into the next cap. As we get closer to the 15th Feb, any blip makes less of a difference to the 1st April cap.
Relatively mild weather and relatively full storage seems to be keeping prices low for now at least...
Just a quick update. Wholesale gas prices remain low and lower than the previous Cornwall Insight price cap estimate. The cold snap and issues with shipping haven't fed through to prices so far at least.
Obviously there are no guarantees with prices…
As always fixed rates give piece of mind.
Obviously nothing is guaranteed and fixed price contracts give piece of mind.
This is from Octopus:
"The energy we're buying right now for the next few months, is coming in as the among the cheapest it's been for the last few years, so of course there are so many problems in the world, but certainly in the short term energy prices look like they're actually going to be coming down and stabilising."
"… in the short term energy prices look like they're actually going to be coming down and stabilising."
Thanks.
I wonder if that was before or after tankers stopped sailing through the Red Sea. I can’t imagine that the troubles down there won’t have an effect on prices soon - perhaps even before Ofgem’s 15 February polling date.
"… in the short term energy prices look like they're actually going to be coming down and stabilising."
Thanks.
I wonder if that was before or after tankers stopped sailing through the Red Sea. I can’t imagine that the troubles down there won’t have an effect on prices soon - perhaps even before Ofgem’s 15 February polling date.
The quote was after.
The fall has been dramatic looking over a longer period that Octopus mention.
Of course we may well get blips and fixed price contracts give piece of mind. Fixed price contracts are good for lots of people.
As Octopus say they have already bought the supply for the next few months now.
The miss match between some of the headlines and the reality of prices is interesting. The red sea hasn't caused a blip yet. Although it could…
These are GB average figures including VAT. There are significant variations from region to region. They are based on wholesale costs and other factors at close of business on 16 February; these are likely to be close to those used by Ofgem to calculate the Energy Price Cap for April-June 2024.
Note the sometimes startling changes in standing charges - any change in standing charges has the biggest impact on those with lowest consumption. There are also unusually large variations around the country, ranging from an 10% increase to a 9% decrease. Do your sums carefully!
We have a couple of weeks before deciding whether to stick or twist, but I’ve been poking around elsewhere to see what’s currently available. I was very surprised to see a 2-year fixed rate tariff from Ecotricity with a guaranteed standing charge (SC) for electricity of 41p/day. I wonder if Dale Vince knows something we don’t about where SCs are likely to go over the next couple of years; the 2024Q2 price cap sets the average SC to 60p, but for my region it’s only (!) 56p. The difference is nevertheless staggering.
Comparing the Ecotricity rates with OVO’s equivalent tariff, I reckon that you’d have to be consuming more than 5300kWh/year for the higher price per unit to outweigh the saving on SC. My usage over the past 12 months has been 1142kWh:
I’d feel pretty foolish, though if SCs fell significantly in response to Ofgem’s planned revision of the way they’re applied. The exit fees would probably swallow any saving and more.
* Trivia: I lived for several years 200m over the hill from New Lawn, the home ground of Vince’s green football club Forest Green Rovers.
Other companies are already sharing the new standing charges and energy costs while OVO are encouraging us to fix. Without all the facts how can we fairly decide?
Other companies are already sharing the new standing charges and energy costs while OVO are encouraging us to fix. Without all the facts how can we fairly decide?
That’s the point with fixing or not fixing.
You don’t, you can’t, have the facts about what will happen with prices in the future, so to fix or not fix is a gamble that you take on what will happen with prices.
And even if you never look at the fixing options and always stay with variable rates that’s still a gamble, just one that you are taking without thinking about it. You are already in the game, you might as well consider how you want to play it.
Sometimes fixing is not even about saving money, but about knowing how much you will be paying for the next year (or 2, or however long you fix for). I have fixed, I know how much electricity and gas I use each year, so I know how much that will cost me each month for the next 12 months. For some people that is important to know, even if it is more than they might have paid on variable rate.
I fixed in December for 12 months, at the moment with the changes coming in April that looks like it might have been the wrong time for me to fix. (If i did it to try and save money). Or it might not have been, that will depend on what further changes are made to unit prices and (particularly for me as a low user) the standing charges in summer and autumn. I won’t know for sure if I made the right money saving decision (gamble) for me until next December. (Well actually I’ll be able to work it out once I know what the autumn rates will be). And then I’ll have to make another gamble between fixing again or not.
Other companies are already sharing the new standing charges and energy costs while OVO are encouraging us to fix. Without all the facts how can we fairly decide?
Hey @Sally123,
Welcome to the OVO Online Community,
Price Increase Notification letters will be sent out from the 4th March and so by 18th, customers on the Simpler Variable Tariff should have a notification of the new prices from OVO.
Price Increase Notification letters will be sent out ...
I thought SVT prices were decreasing on 1 April
Spot on @Firedog, Prices are decreasing so we won’t be sending any Price Increase Notification letters this time.
The Standard Variable tariff prices will be update online, you can get a quote here: https://plans.ovoenergy.com/.
Thanks, Abby
Thanks @Firedog
Hi,
can I get your opinions please. What is the best rate to be on now the rates have gone down. I don’t really understand it all. I’m o variable at the minute. Thank you
You will get a variety of opinions on the forum
For piece of mind fixing now will lock you into lower rates than your current variable rate. That is because wholesale prices have fallen so energy suppliers can buy energy in advance cheaply at the moment.
Your variable rate is forecast to be lower than it is now if you decide not to switch
It is worth shopping around if you decide to fix as you may find better offers elsewhere than OVO.
If you want to stay on a variable tariff then there is an Eon tariff that guarantees to track lower than the price cap for 12 month with no exit fees.
Overall I would say now isn't a bad time to think about fixing. There is nothing to suggest another big fall in wholesale prices.
In my case, OVO is offering a 1 or 2-year Fixed Loyalty plan, which has higher unit rates and standing charges. Unless you anticipate energy prices increasing in the future, there is no incentive to switch, or you can simply consider switching elsewhere for those offering a better deal.
In my case, OVO is offering a 1 or 2-year Fixed Loyalty plan, which has higher unit rates and standing charges. Unless you anticipate energy prices increasing in the future, there is no incentive to switch, or you can simply consider switching elsewhere for those offering a better deal.
Iinteresting as ovo are offering me lower fixed unit rates.
Are you able to post the comparison from the ovo renewal page?
That's incredible. The fixed daily charges for my account are ludicrously high. It reduces the incentive to save. My variable daily rate is 66.55p electric and 30.07p gas. North East England.
Reply
Need advice from other members?
Ask your question to our members - they have the experience you're looking for:
