The energy situation here in the UK continues to be a cause for concern for many people. All the changes, ongoing commentary, and confusion are leading many bill payers across the country to decide once again whether it’s best to go for a fixed-rate energy deal or hope for more favourable prices and terms later on.
What is a fixed-rate energy deal?
This means agreeing to a fixed price for your electricity and gas for an agreed period of time.
Most fixed-rate energy deals allow you to lock in prices (with unit rates and standing charges) for a year, but some are now more flexible – meaning you can select a contract length of months or years.
Depending on where you live, you can choose to have your electricity and gas on a fixed rate with a single supplier or set things up as two separate agreements.
The alternative to a fixed-rate deal would be a standard variable tariff which can change and move in line with energy price changes.
Should you go for a fixed-rate energy tariff in 2023?
This will depend on what’s most important to you. The key advantages of a fixed-rate energy deal include the following:
- Locking-in prices – protection against price increases means that if energy prices rise further, it won’t affect your bills or cost you more while you’re on a fixed-rate contract.
- Cheaper – they can work out cheaper in some (but not all) cases.
- Stability – knowing exactly how much you will be paying can allow you to budget and plan your finances better.
- Choice – many energy suppliers will offer a fixed-rate option, giving you plenty of companies to choose from.
However, there are also some drawbacks and disadvantages to think about with a fixed-rate tariff:
- Missing out on deals – if you’re locked into a contract, you could lose out on better offers if energy prices fall.
- Exit fees – should you decide to leave before the end of the fixed-rate term, you’d likely pay an exit fee ranging between £5 and £35 per fuel.
- Admin – once the term ends, it’s up to you to find another deal. Otherwise, you’ll get rolled onto an expensive standard variable tariff.
- Complicated – sometimes, it can take effort to compare the deals available and work out exactly how much each one will cost you.
Will energy prices go up on a fixed-rate?
No. The key benefit is that when you’re on a fixed-rate tariff, your prices might be reduced, but won’t be increased.
Are fixed-rate energy deals worth it?
They can be. The idea of a fixed-rate deal (amongst a backdrop of rising energy prices) sounds nice on paper, but is it a good deal overall?
Energy companies aren’t going to hand out fixed-rate deals that aren’t economically beneficial to them. You need to decide whether it could still work out cheaper for you, or if there are factors other than price to consider, such as peace of mind knowing exactly what your bills are going to be every month.