Should I commit to a fixed deal, or should I wait?

I was told on the phone by an OVO agent last week that a new tariff will be announced on 1. October with lower rates than the current 1 year fixed rate tariff. My contract ended on 25th and he advised me to let it go to variable rate for a few days then sign up for the new fixed rate tariff online after 1. October.  Fingers crossed he knew what he was talking about! I'll know in a couple of days! 

Hey @Tricia,

Yes the new rates will be effective from the 1st of October, this will allow you to compare to the fixed rate plans.

This FAQ may be helpful:

If you visit your renewal page, you should see the new rates both for fixed and variable tariffs.

Thank you for all the replies. Sound and logical in all you say, I'm sure they will help my decision. 

The renewal page is not yet showing a change for the 1 year fixed rate tariff. It should show on Sunday or Monday! 

I think you’re rather missing the point of fixed-rate tariffs. OVO and other energy companies determine their prices depending on what they expect to have to pay in the future. Until the price cap was introduced some years ago, they were pretty much allowed to charge what they wanted to, and it was simply supply and demand that kept prices in check. This wasn’t working for many customers, though, who didn’t shop around for better deals but simply stayed with the same company year after year regardless of whether they were paying over the odds. The price cap was intended to prevent this, and set a limit on how much companies could charge.

The cap used to change twice yearly, but since last year it’s been calculated every quarter depending on how wholesale prices moved, bearing in mind that companies have to buy what they expect to need in advance, at prices set by the wholesale market. Now it’s possible for customers to know what they will be paying for the next quarter.

This has been pretty volatile over the past two years, so those who rely on knowing what they can expect to pay over a longer period - a year or two - have the possibility of buying at a fixed price. The price a plan is offered at can change anytime, as suppliers follow the changes they see in wholesale markets. However, once a customer accepts an offer at a specific price, it won’t change over the length of the contract. 

So there will not be any change in the offer price for fixed tariffs simply because a new price cap enters into force. The supplier is gambling on having a certain number of customers on a particular tariff; this is the reason why there are exit fees if the customer chooses to end the contract early and start to pay at a perhaps lower variable price, which will change with the price cap unless something drastic happens in the next year or two. 

I live on my own and I'm in credit,I asked for a refund online and it says, that because I don't have a direct debit,I can't get a refund, should I go for a fixed deal with Ovo?as I just pay money into my account monthly and I'm in credit?

Please consider paying by monthly Direct Debit. For the typical dual-fuel household, it represents a saving of nearly £120 a year - that’s £10 a month for the privilege of going to the trouble of paying into your account each month, as opposed to letting the bank just see to it for you. If you do this, your credit balance will be factored into the calculation of your monthly payment, which will aim to bring your balance to zero a year hence, i.e. at the end of next winter. 

Many of the more attractive tariffs, including fixed-rate ones, are only available to those who pay by Direct Debit as you’ve probably realized. Choosing a fixed-rate plan is a gamble, which often pays off. It varies a lot around the country what rates are available, but the ones I’ve seen (and I only look at electricity prices) still have unit rates below the current standard variable tariff (‘Simpler Energy’). This looks like a good idea since unit rates are about to rise significantly with the price cap from 1 April. The picture is a bit less clear as regards standing charges: they are set to fall for many from next month, but they’re widely expected to rise again by 4-5p a day in the autumn. You’ll have to do your sums carefully to see just what you’re likely to pay over a fixed-rate term compared with what you might otherwise pay. There’s also the question of the exit fee: this will be added to your costs should you change your mind before the term is up, so should be factored into your calculation. 

One big advantage of a fixed-rate plan is that you know precisely how much you’ll be paying for the energy you use, regardless of changes in the price cap which are sometimes triggered by events far beyond your control - like wars in Eastern Europe, strikes by Australian coal miners or tariffs imposed by unfriendly gas exporters. Peace of mind may well be worth paying for.

Thanks very much for your advice 

I will phone Ovo tomorrow 

As I am in credit in my account and I'm a low user, Can your direct debit increase?

Someone told me that they do this 

I'm happy with Ovo energy 

My monthly bill there was £86 for dual energy and I live on my own 

Your DD is reviewed quarterly to make sure you’re still heading for the right target, although we don’t yet know what this will be once we move into summertime. If your annual usage projections are at all accurate (they’re on the Plan page labelled Future annual consumption), there shouldn’t be any problem with major changes to the DD. You’ll always be advised in advance if the computer thinks the DD should change, giving you time to react.