• Ofgem-set price cap could drop below £1,500 in July 
  • Cornwall Insight says ‘risk’ current fixes will not translate into savings
  • Tempted to switch? Read what to consider in the box at the bottom 

By Rory Poulter For Thisismoney

Updated:

Energy industry analysts have issued a new warning about fixed-rate tariffs that come with punishing exit fees.

The alert follows research which found the cheapest fixed rate energy tariff on the market is £130 a year higher than the predicted annual figure for the official price cap from April 1.

Industry analysts Cornwall Insight have warned households against signing up to fixed-rate deals that could leave them out of pocket.

It spoke out following from This is Money about a controversial new fixed rate tariff offered by Scottish Power in partnership with Cancer Research UK.

Fix warning: Cornwall Insight says that fixing now could be unwise, with the Ofgem-set price cap set to fall in April and July

Fix warning: Cornwall Insight says that fixing now could be unwise, with the Ofgem-set price cap set to fall in April and July

It is being promoted with claims that it would be £129 a year cheaper than the existing price cap figure of £1,928 for typical annual use.

However, Cornwall Insight say this fixed rate deal and others on the market will be considerably more expensive than the predicted price cap figure of £1,620 from 1 April, before it then drops again to £1,497 in July.

Cornwall Insight said: ‘Fixed tariffs offer the benefit of locked-in energy rates, usually for a year or more, but if variable energy prices come down, and customers want to switch before the end of their contract, they could incur a large exit fee.’

There are currently 35 fixed rate tariffs available in the market. The exit fee on the Scottish Power ‘Help Beat Cancer’ tariff is £150 per fuel – a total of £300 – if the customer switches to a rival supplier.

James Mabey, analyst at Cornwall Insight, adds: ‘After a slow comeback, fixed energy deals have started to attract more customers, with the guaranteed rates proving increasingly appealing to those seeking to protect themselves from further economic instability.

‘With some fixed energy tariffs dipping below the existing price cap, it’s understandably tempting to sign up. 

‘However, there is a risk these deals might not translate to actual savings come April, when a significant decrease in the price cap is projected. 

‘It is important consumers weigh the immediate appeal of a slightly lower price against the potential for larger savings down the line.’

Tempted to fix? What to consider…

With more energy suppliers now offering fixed energy tariffs, many households might be considering signing up to one once again, writes Sam Barker.

Before taking the plunge, it is vital to consider these four steps:

1. Make sure the deal is a good one

To work out if an energy deal – fixed or otherwise – is cheaper than you are paying now, compare the unit rate and standing charge with what you currently pay.

The average home is paying rates limited by the Ofgem price cap, which means 53p a day in electricity standing charges and 30p for gas, while electricity unit rates are 29p per kilowatt-hour (kWh) and 7p/kWh for gas.

The massive variable is what happens with the Ofgem price cap in the future. 

It might be possible to lock into a cheaper deal now, only to see the price cap fall significantly, leaving you overpaying.

2. Remember to check the exit fees

Many fixed-rate energy deals come with steep exit fees, which you will pay if you try to leave the deal early. 

These can be as high as £150 each for gas and electricity.

3. Check your emails

At the moment there are almost no fixed-rate energy deals on the open market. 

But many energy firms do have cheaper fixes only open to their existing customers. 

They advertise these by emailing their customers, so remember to check all emails from your energy firm. 

4. Timing is everything

Energy prices are predicted to dip this July to £1,497 a year for average use, down from £1,928 a year now. 

So it may be worth holding off on taking a fixed rate until the summer, when the price of them may come down.

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