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Why is there no one-year fixed contract option offered by OVO Energy at the moment?

  • 11 November 2021
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Renewal time. For the first time since I have been with Ovo, there is no one-year fixed price tariff.

And whereas the variable tariff was perhaps seen as more risky in the past, which is why many people fixed, it is now over 35% more expensive for me to fix for 3 years and 55% more expensive for me to fix for 2 years - compared to the variable tariff now.

I understand the lower variable price is because of the Ofgem cap that has not been updated (and that companies are losing money on this tariff now).

I was told by customer service that the lack of a one-year fix tariff was ‘due to market conditions’. Surely Ovo could have offered a one-year fix that people would have gone for? Or would it have had to be so much more than even the current two-year fix? As I have fixed for one year every year until now, I might well have gone for that again.  I cannot see any sense in fixing for 2 or 3 years and risking £120 or £60 to exit the contract if prices do not rise that much and other tariffs are better. When the cap is raised in March 2022 we will see what is offered for a fix then.

Can someone from Ovo offer any insight as to why it was not possible to offer a one-year fix this time?

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Best answer by Jess_OVO 12 November 2021, 17:56

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Hi @G57l ,

I’m Blastoise186, one of the forum volunteers on the OVO Forum. Welcome!

This sounds like a policy related question that I don’t have the answer to, so I’ll need to ask @Jess_OVO for help with this. Please hang in there for a bit and we’ll keep you posted.

Thanks

Userlevel 7

The wholesale energy market has been in the news a lot lately due to very high prices.

 

See our blog here and our FAQs here. We've made some changes to our available plans as a result. We'll ask this question around the 1 year 'Better Energy' plan and get back to you.

 

So we’ve checked this one with the team who’ve advised:

“Due to the short term uncertainty in the wholesale energy market, longer term prices allow us to give customers the best value for fixed plans. As a result our one year fixed ‘Better Energy’ plan isn't currently available."

 

Userlevel 7

So we’ve checked this one with the team who’ve advised:

“Due to the short term uncertainty in the wholesale energy market, longer term prices allow us to give customers the best value for fixed plans. As a result our one year fixed ‘Better Energy’ plan isn't currently available."

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Thanks, Jess. Given the prices for 2 and 3 year deals, I translate that as “We have no idea where to set the price for a one-year fix. If we set it to account for current wholesale prices it will be so high nobody will sign up. If we set it lower than that to try to get people to sign up , we are at significant risk of getting caught out and losing even more money”

I also suspect it serves Ovo and other providers very well to reasonably set high prices for 2 and 3 year deals as this will increase the number of people on the variable deals and thus increase the absolute amount Ovo will lose by selling at a loss - increasing pressure on Ofgem to increase the cap as much as possible.

Hey-ho. Variable rate for me, and let’s see where prices go and what the new Ofgem cap is next year.

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Hi @G57l Strangely enough I just posted something relevant in terms of price tends in another topic:

I’ve been monitoring the available 12m fixed tariffs to get an idea of movement in prices. Back in October when prices started to spiral, in my area, unit prices were electricity 26.2p / gas 6.0p. This rocketed to 35.6p and 10.6p towards the end of October. The first November tariff saw a decrease to 29.8p / 7.2p and now it’s almost back to the start of October levels at 27.0p / 6.7p. I reckon there’s probably more decreases to come before things stabilise. 

I think it’s probably best for you to sit on the variable for the next month or so and see how the prices develop. My guess is that it will be best to fix in the beginning quarter of next year prior to the scramble to lock in before the next variable rise. But it’s just a guess!

 

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My guess is that it will be best to fix in the beginning quarter of next year prior to the scramble to lock in before the next variable rise. But it’s just a guess!

 

I suspect you are right. But I wonder if there will even be a one-year fix offered by then. I doubt it will appear until after the cap is reset.

And Russia’s antics (including in Ukraine) may change things, too.  I read today that Germany had suspended approval for the NordStream2 gas pipeline. These geo-political factors may yet have a significant impact on wholesale gas prices over the next few months.

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But I wonder if there will even be a one-year fix offered by then. I doubt it will appear until after the cap is reset.

It’s interesting to see the different approaches by different suppliers. I can only get a 12m fix and not a 2 or 3 year fix with my current supplier! This may suggest that even those with more knowledge than most of us can’t agree on what’s best in the current market conditions!

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