Consider the pros and cons of a fixed energy tariff vs. a variable one to make an informed decision.
Revamped and Refined:
April's energy bills have skyrocketed as the Ofgem energy price cap soared by a whopping 6.4%. This means an average bill of £1,849 per year for householders on direct debit for gas and electricity. Keep in mind, individual usage determines the exact amount.
The price hike marks the third consecutive increase in the energy price cap, following a steady upward trend in energy prices since July 2024. The new energy price cap affects 22 million households that are using a standard variable tariff - as stated by Ofgem's February 2025 data.
However, the news isn't all bleak; an increasing number of households are now opting for fixed rate energy tariffs. The latest figures suggest roughly 11 million households are now on such tariffs, protecting them from price fluctuations.
If you choose a fixed rate energy tariff, your rates will remain steady for a predetermined period (usually a year) regardless of price cap changes. However, the downside is that you could be stuck paying more if the price cap falls.
Now that energy bills have shot up, should you stick with the price cap or migrate to a fixed tariff? Let's take a look at the currently available fixed deals.
Pricing Breakdown:
While 11 million households have a fixed energy deal, 22 million households are still subject to the energy price cap. The cap determines the maximum price each unit (kilowatt hour, or kWh) of energy can cost, as well as standing charges, on a standard variable or default tariff.
Gas & Electricity:
Fuel
| Fuel | Price per kWh (Unit Rate) | Standing Charge (per day) || --- | --- | --- || Gas | 6.99p | 32.67p || Electricity | 27.03p | 53.80p |
Please remember, these rates are national averages, and actual unit rates in your area may vary. Visit the energy regulator's website to find prices in your area.
Price per kilowatt hour (kWh)
Fixing your energy rates means your unit rates and standing charges stay consistent for the agreed period. This approach can offer financial security and could even save you money if the price cap increases.
Recent predictions by energy consultancy Cornwall Insight suggest the price cap may fall by approximately 7% from July to September 2025. Based on this forecast, annual energy bills for the average household would drop by £137 from £1,849, making the three months from June acquaint you with a lower bill of £1,712.
Standing charge (per day)
However, the consultancy's forecast remains subject to change due to energy market volatility.
"The latest forecast drop brings some relief to households and the government, offering a promising sign that energy prices are moving in the right direction," noted Dr Craig Lowrey, Principal Consultant at Cornwall Insight. Yet, "we mustn't get ahead of ourselves," he warned, "as household bills remain highly susceptible to sudden shocks."
With predictions of the price cap falling in July, it may not be wise to enter a fixed rate energy tariff at a rate greater than the expected fall. This is because, if the market's predictions prove correct and the price cap falls, you will be stuck with a higher energy bill.
On the other hand, if the predictions get it wrong and the price cap increases, you will end up paying less. Additionally, should price cap changes occur beyond those in the next quarter, you may avoid these changes with a fixed term.
Gas
The new energy price cap for 1 July to 31 September will be announced on 27 May, 2025.
Top Tariff Offers:
6.99p
Here's a list of the most affordable currently available tariff options for new customers:
Offers Cheaper Than the April Price Cap:
32.67p
- Outfox the Market Outfox the Price Cap (Apr 25) 12M Fix'd Dual v2.0: A 12-month fix available to both new and existing customers, offering savings of 13.2%. It is dual-fuel, and cancellation costs £50 per fuel.
- E.on Next Fixed 14m v2: A 14-month dual-fuel fix available to new and existing customers, saving 12.4%. There are dual-fuel exit fees of £50 if you elect to end your contract early.
- EDF Energy Simply Fixed Jul26 v2: A 16-month fixed rate tariff 12.1% cheaper, open to new and existing customers, and bearing a £25 per fuel exit fee.
- Ovo Energy Extended Fixed: A 15-month fixed rate tariff 11.8% less than the price cap, with a £75 per fuel exit fee.
Remember, these deals are generally available, although existing customers may have access to loyalty deals with superior rates. Be mindful of any conditions accompanying deals, such as smart meter or additional service requirements.
If you own an electric vehicle (EV), you can consider EV-specific tariffs, which may prove more economical.
Switching Tariffs:
Electricity
With the price cap on the rise, now may be the right time to consider a fixed rate tariff to safeguard yourself from further hikes. However, whether to make the switch depends on your risk tolerance and whether you believe energy bills will rise or fall in the coming year.
Securing a fixed deal cheaper than the April price cap could result in savings, but you could still be hit with early exit fees. As Cornwall Insight's predictions suggest a July price cap drop of 7%, opting for a fixed tariff at a rate below that could still result in cost savings.
27.03p
However, if the price cap falls more than expected, you may end up stuck with a higher bill.
"Locking in a fixed deal offers certainty over your energy costs during the contract term, shielding you from potential future increases," explains Myron Jobson, senior personal finance analyst at interactive investor.
53.80p
"However, it's crucial to navigate any exit fees and evaluate the possibility that energy prices might stabilize or decrease in the future, leaving you locked into a higher rate."
Jobson also recommends exploring if your supplier offers incentives or support schemes that could alleviate rising energy costs. These might include providers offering free electricity during specific periods or discounts for off-peak usage.
"Ultimately, the decision to fix your energy bills should hinge on a careful assessment of your personal circumstances and a thorough examination of available tariffs."
For the latest price cap predictions, visit our article on "Will energy prices fall in 2025?".
Switching Rules Changes:
If you do decide to make the switch, you should be aware of new regulations implemented by the energy regulator, Ofgem. Previously, suppliers were required to complete a switch within 15 working days. Failing to do so would make them liable for compensation.
Starting from 1 April 2024, suppliers must complete customer switches within five working days (six if the customer enters into a contract after 5pm). Failure to comply means they must compensate affected customers £30.
If the supplier you're moving to fails to complete the switch on time, it's advisable to file a complaint with them directly. Non-payment of due compensation can be escalated to the Energy Ombudsman to resolve disputes.
- The news about the skyrocketing energy bills might lead some households to consider managing their personal finances more carefully, especially in the context of personal-finance decisions related to business, such as opting for fixed rate energy tariffs to mitigate the effects of tariffs on their household budgets.
2.With the energy price cap affecting nearly 22 million households and set to determine the maximum price for energy units (kWh) and standing charges, the finance industry is closely watching this trend and its potential impact on personal finance, including the possibility of increased competition within the energy sector based on tariff offerings.
- Meanwhile, the energy industry is not the only one experiencing changes, as the rise in energy bills could lead to increased scrutiny on tariffs in other sectors, such as telecommunications or internet services, where residents might look for more affordable fixed-rate options to secure their personal finances better and avoid unexpected price hikes.
