The Daily Telegraph
Families who fixed energy deals covered by bailout
HOUSEHOLDS on fixed-rate energy deals will have their bills slashed under Liz Truss’s price freeze, but they will still be paying more than necessary.
It is feared thousands of customers may have been tempted to lock into contracts to pay a fixed price for gas and electricity as average bills were expected to soar above £6,000 next year.
However, the new Prime Minister’s energy price guarantee means the average household on their supplier’s default tariff will pay no more than £2,500 for their annual energy bill until 2024.
Those who signed up to fixed rate deals will also have their bills automatically cut, it has emerged, but customers are likely to be better off paying an exit fee to move to a standard variable tariff.
The bill cap, which comes into force next month, means households will still pay 40pc more for gas usage, while electricity will cost 7pc more to use.
As part of Ms Truss’s energy price guarantee, those on a fixed tariff will pay 17p per kwh less for electricity and 4.2p less per kwh for gas. The cut will save the average household £564 for gas, £493 for electricity, based on average consumption values reported by Ofgem.
Not one major provider is currently offering fixed tariffs due to soaring wholesale energy prices, according to comparison site Uswitch. This is because when a customer signs a fixed-rate deal, provider must purchase a year’s supply of energy upfront, accounting for expected prices during that time.
But many may have been tempted to lock into fixed deals before Ms Truss’s intervention. Ofgem, the regulator, was due to raise the price cap on typical bills from close to £2,000 to more than £3,500 from Oct 1. Some customers were offered quotes of up to £16,000 a year for their en ergy usage on a fixed deal.
Some providers charge exit fees of up to £600 for customers who leave deals before the end of the term, according to Uswitch. However, there has been speculation that the Government will force providers to waive these fees.
Energy companies have been left in the dark on the details of Ms Truss’s policy, and some are waiting on further guidance to make a decision on exit fees. The Department for Business was approached for comment.