If the cap fits, fix it or is it time to switch supplier?
Finally, some good news about energy bills! From April the new Ofgem price cap means bills will drop by an average of £238 to £1,690 a year. Even better, it’s predicted that this will drop even more in July to around the £1,463 mark (not guaranteed though).
Of course, this is all relative. Bills might be reaching their ‘lowest’ level for the last two years but millions of people are still stuck with massive energy debts. It’s too cold to knock off the heating just yet and we might see another increase in the price in October.
Energy companies know that we’re struggling and many are offering deals for their existing customers so you can ‘fix’ the price that you pay for a set period of time. But are they any good?
Here’s my guide.
Should I switch to get a better energy deal?
Energy prices are still highly volatile and we have a number of political and international situations that could have an impact on the price we ultimately pay for our energy bills. So no matter how much I buff my crystal ball, bear in mind that nothing is guaranteed.
Firstly, a bit of terminology. Switching is the act of going to another energy provider for a better deal. There’s not a huge amount of competition in the market at the moment for better switching deals but it’s more of an option now if you’ve had it with your energy supplier and want to bail.
Fixing is where you agree to ‘fix’ a price for energy for the duration of the contract. You can do this by switching or by staying with your current energy supplier. But the better deals are available if you agree to stay put. Just to confuse things, some deals ‘track’ the price cap, staying a little under it if it reduces (though only for the next price cap announcement or two).
Despite the tempting deals, there are a number of factors you need to bear in mind if you are thinking about fixing:
Duration: How long is the contract?
Total price of the contract: How much are you saving by fixing a price over the term of the contract?
Exit fees: How much do you have to pay to get out of the contract early?
Deal breakers: Do you have other contractual obligations to get a good deal, like agreeing to take out an insurance policy through the business too?
Exit fees apply with most deals and range from £75 to £200 to leave a contract early. So bear in mind if prices drop significantly, it might be costly to jump ship.
All in all, I’d say fixing now is a good idea only if you are naturally cautious and can afford to pay a set amount of money hovering just under the current price cap for your energy for over a year.
What if I can’t afford to fix my bill?
If you don’t have enough money to cover your outgoings – or you are left with little to cover you for emergencies – you meet the definition of financial difficulties. According to Ofgem’s regulations, your energy provider should come up with a tailored plan to meet your needs. You can read what businesses are supposed to do at ofgem.gov.uk
The regulator says that you can ask for the following:
A review of your payments and debt repayments
Payment breaks or reductions More time to pay
Access to hardship funds
Advice on how to use less energy The option to go on the Priority Services Register which is a free service for a wide range of people struggling or who need support. Again, go to ofgem.gov.uk
If you feel that the business is not listening, you can take your complaint to the Energy Ombudsman for free. Make it clear to the business that you expect them to take no action against you while the matter is looked into by the ombudsman.