Price cap increases- To fix or not to fix?

I fixed back in May at rates which have so far saved me a bit over the SVT. The saving will get quite a bit bigger in October. I was a bit miffed to see that the 1-year Loyalty fix released last week is a bit cheaper, but the difference would amount to less than 10p a week, so I can’t be bothered to change.
  

You’re not referring to the passage that says “Your unit rates and standing charges might show differently on your statements,” are you? That’s always included to point out that rates on bills are shown ex VAT, with the VAT added lower down. Rates in quotes and confirmation emails and on TILs are always inclusive of VAT, but rates on the tariffs page are given ex VAT just to be awkward.  

Given that Q3 2024 and Q1 2025 are shown as increases by Cornwall Insight fixing is probably a good idea but there isn't much in it unlike before the surge in energy prices where there was an appreciable advantage in doing so.

My issue about fixing is that it’s a bet. You are betting that your guess on energy prices is going to be better than a company whose business is estimating future energy costs and set the price to come out in the profit side of the deal. By opting for a Fixed Term the company can buy further ahead on the Futures Market and get a better deal. Where it gets a bit muddy is that the company may take a gamble on a smaller margin or perhaps even a small loss to keep you on board and stop you going elsewhere. That improves the Fixed Terms odds.

Given the uncertainty in the energy market at the moment I would probably only fix for a year. One of the known factors is that at the end of this year Ukraine's gas transit contract with Gazprom finishes and they are likely to turn the remainder of gas (not LNG) flowing to Europe off. This is likely to unsettle the gas market, prices go up and those on Fixed Terms gleefully rub their hands together. On the other side gas storage is very high, just over 90%, for this winter, gas supply is also somewhat diversified now and if we have another mild winter gas prices could plummet Q2/Q3 2025. Hooray for the SVT.

Who wants to throw the dice?

Peter

I’ve always likened fixing price to having insurance or not. 
In many cases you’re not obliged to have insurance but it gives you peace of mind, just in case. 

@BPLightlog That is a very good analogy and peace of mind is an important aspect of this. Being able to calculate the risk has its advantages though.

If you are already fixed then you will not be shown an option to change tariff on the app or the browser account portal until 53 days before your current fixed plan end - so the only way to ‘tariff hop’ to a new fix is to contact customer support.

Be aware that if, as an existing customer, you use the ‘Get a Quote’ page to sign up to a new tariff then you may find that you have actually done an account switch to a new account number.
You probably don’t want to do that, see here:

Hey all,

I know this will be a reasonably significant topic over the next few months, so thank you all for sharing your thoughts and insights so far.

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.