Experts have told households whose energy bills are pegged to the price cap not to “rest on their laurels” as they could save more than £200 a year on a fixed deal.
This week, Ofgem said the price cap in Great Britain would drop by 7% from April. This usually only matters if you are on a default tariff, but this time the reduction applies to everyone because the government is removing green charges from bills.
After the announcement by the energy regulator, the consumer champion Martin Lewis said you could “never work out the perfect time” to sign up to a fixed deal, but now was a “pretty good time”.
The MoneySavingExpert founder said the cheapest fix available now was 14% cheaper than the current cap (£1,758 a year for a typical dual-fuel customer), adding: “You’re paying too much if you’re on it. If you can get off it, get off it.”
The cap restricts how much suppliers can charge a customer on a default tariff for each kilowatt hour of electricity and gas they use, and also standing charges. From 1 April the new unit rates will cut £117 from the average dual-fuel bill to £1,641 a year.
When the new cap comes in, Lewis predicted fixed rates would fall by 7%-9%, so the “differential between the two, the 14%-ish you’re going to save if you go for the cheapest fix, will remain”.
Analysts think energy costs will sit around the new price cap level for most of the rest of the year. “So the amount you save on a fix, should remain pretty constant if those predictions are correct,” said Lewis.
Similarly, Richard Neudegg, the director of regulation at the price comparison site Uswitch.com, said households “stuck on the price cap should not rest on their laurels”.
“Every single household can expect to see an adjustment in their bills from April, regardless of which supplier they’re with or which tariff they’re on,” he said.
“But the real winners are households who are on, or get themselves on to, a cheap fixed tariff before April, as they’ll benefit the most from lower rates on their heating right now, and a further fall in price from April.”
“By opting for a fixed deal, they could cut their heating bills right now when it matters most, and still see the benefit from the government’s intervention in April,” he added.
Top of the Uswitch best-buy table at the time of writing was Fuse Energy with a 13-month deal priced at £1,498 based on typical usage, which is £260 below the January price cap and £143 below the April figure. Outfox Energy has a 12-month deal priced at £1,519, while Meanwhile, EDF has a price cap tracker, which matches the rate, but also offers £100 off standing charges for a year.