What if I fix my energy bills and then the prices drop?

Are energy bills going to go up or down? That’s the big question in the news this week, as different energy consultancies battle to predict the future.

On one hand, the Government’s Energy Price Guarantee ends in April. This means bills will no longer be limited to an average of £2,500 a year. This cap will rise to £3,000 and operate for a year.

In addition, the Energy Bills Support Scheme (gov.uk/get-helpenergy-bills/getting-discountenergy-bill) is due to end in April too. So the monthly discounts, currently £67 a month, will end in March. Plus, lots of vouchers for people on pre-payment meters have not been claimed, so if you are affected, contact your electricity supplier.

This means bills will rise in real terms by 20%.

MoneySavingExpert has a great guide to the Guarantee at moneysavingexpert. com/utilities/energyprice-guarantee/

Many organisations are predicting price drops, so how can two things be true at the same time?

Well, firstly, no one knows definitively what’s going to happen over the next few months. However, most of the energy specialists I’ve spoken to expect wholesale energy prices to drop by July, which in turn could result in something unthinkable – the possibility of switching to a better deal.

IF PRICES DROP, DO I FIX?

unbelievable rise in prices that began this time last year.

In 2023, as Government support begins to be scaled back, being on a ‘variable’ tariff might be a concern for the more risk averse.

If prices do drop by July, then it’s likely that businesses might compete to offer the ‘best’ rates for potential energy switchers.

However, don’t rush in to a deal. Last year, when it looked like energy prices might top £5,000 a year, some energy firms offered the option of long-term fixes at huge rates – effectively trapping people into very expensive deals.

They also dramatically increased the size of exit fees – in some cases raising prices ten-fold.

The moral is that some energy firms will look to the future and predict what deals work best for them, rather than what might be better for you. So check the details of the deal before committing.

As it was, when the Government Price Guarantee came in, these bigger deals were Fixing could be a risk

largely wiped out. But if prices should drop

that support is ending – and you’ll have to pay to leave a bad fixed deal in the future.

If you are considering a fix, ask the energy firm to email or post information to you so you have time to think about the deal and seek advice.

If you are with the same energy firm, don’t forget that the business has an obligation to help you if you can’t afford your bills now. The solution to this is not to offer you a deal that you can’t afford. This is potentially mis-selling and you should make a complaint if you felt pressured into agreeing.

Ultimately, deciding on whether to sign up to a fixed deal right now involves predicting a volatile future, pre-empting support schemes and Government intervention (don’t get your hopes up), guessing what the wholesale energy price might be and doing complicated maths.

Fixing isn’t necessarily the best option. But it is a potential way you could save. Just make sure you fully understand all the risks before signing up.

I’ve had calls and messages about ‘fixing’ energy bills because of rumours about price drops.

Fixing is where you agree a set price for energy for a set period of time, tending to range from one to five years. But you are committing to pay that amount for that whole period, even if prices drop significantly – and there are exit fees for leaving the contract early.

FIXING – THE PROS AND CONS

Cast your mind back a few years and fixing a price for energy was a good idea. Back then, millions of us were on fixed deals until the