Renewal dilemma discussion - What's the best option (fixed or variable) in the current energy market?

@knight Agile was brilliant in 2020 with low network demand meaning low wholesale prices. I think I averaged around 5p/kWh that year. Now, with wholesale prices remaining high it’s just not viable unless you have solar+storage to make the most of outgoing payments. Hopefully the market changes again next year as the idea behind TOU is good.

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. 

Hi, My fixed rate tariff is ending on 22/06/22, I have dual fuel, and have been an Ovo customer for many years. I have been offered 2 fixed rate deals, a 1 year, and a 2 year, both of which are much higher than the present cap. I could take a deal, or just let it go to the Variable tariff.

My question is though, if I do go to the Variable tariff, will the Fixed rate offers disappear as soon as my current tariff ends on the above date?

Hi @elddisvogue ,

I’m Blastoise186, one of the forum volunteers. :)

It’s worth noting that fixed rate deals are not affected by the price caps, however they do reflect the true cost of supplying energy and being on them helps to support OVO, especially in the current market circumstances.

I’m afraid those fixed rate offers you’re seeing now are only guaranteed for 30 days at most, but probably more like 7 days. Given the current price cap expires in about four and a half months from the time of me writing this comment, you’ll be unlikely to benefit much from the temporarily “lower” prices as any savings will likely be gobbled up by higher prices later on.

If you go for a fixed rate deal though, you’re guaranteed to lock in the same rates for the entire term, no matter what happens to the price cap. I’d suggest going for a two year deal now as you’ll have at least 14 days to change your mind fee-free and you’ll beat further price increases until June 2024. :)

In the longer term, you are on average far more likely to save more using these fixed rate deals than you will ever save in the short term by surfing the price capped variable rate tariffs that the Ofgem Default Tariff Cap controls. It’s also worth noting that the price caps will soon be very likely to get updated every three months rather than every six months, which may further erode any possible savings from them.

One last thing to note. The most widely known price cap is ONLY a national average and does not reflect the actual price caps that apply to your area. Your actual price caps could be higher or lower than the national average and this should also be factored in when making any decisions. Likewise, the fixed rate offers will also reflect differences in cost around the UK.

A really important question this one, @elddisvogue.

We appreciate it can be harder to make a renewal decision at the moment. 

To answer this one, whilst the exact prices you’ve been offer on our fixed plan options are subject to change, you’ll still be able to choose a fixed plan at a later date. 

There’s also more information on the Variable Price Cap and ways to find additional support on our website here.

I hope this helps work out the best option for you.

My fixed tariff recently came to an end and I let it automatically roll onto the variable tariff.

I still get the prompt to switch to a fixed rate if i want to.

You will get a variety of opinions on whether you should fix for piece of mind or go onto the price cap variable rate which is cheaper until at least October. The price cap is almost certainly going up in October as an increase is already baked in, but it is not yet clear by how much or for how long. 

It appears from ofgem today that their plan is to update the price cap every 3 months so October, January, April, July. I have mixed views about this as the price cap may become even more volatile for consumers due to short term blips in wholesale prices. 

As an example of the volatility, the UK wholesale gas price has fallen and bobbed along at a lower level for about a month now, in fact it is lower than before the Ukraine crisis started, but predicting the future is full of uncertainty....

Thanks for your input everyone, I've decided to let it go to the variable tariff for now, and just see how it goes. The recent news about another hike sooner than anticipated is a worry though.

What will the approximate price increase be when my current fixed rate plan ends?

Hi @Will Marwick 

In order to answer that we'd need to know what tariff and prices you are currently paying.

The longer you've had your existing fixed rate the lower your existing prices are likely to be and therefore the % increase will be higher.

My electricity tariff is 15.71p/kWh

Gas is 2.92p/kWh

Both on 2 year fixed rated which expires 24th November 2022

Regards,

Will

Those are very good rates at this current time, so probably worth keeping that fixed rate to the very end of the contract.

There are a few uncertainties as to how the cap increase in October will be assigned, whether there will be a greater increase to gas prices than electricity prices, and how the thorny issue of standing charges is addressed. 

By applying around a 65% increase to existing variable unit rates you are potentially looking at around 48p/kWh for electricity and 12p/kWh for gas. This will vary by region and the increase could be weighted more to one fuel than the other.

Current standing charges are in the region of 40p/day for electricity and 27p/day for gas. These could go up, stay the same or even go down if burden is shifted away from standing charges.

All this involves a lot of guesswork and all views are my own!