Is now the right time to fix your energy deal?

As the energy price cap is slashed for summer, we get expert advice on whether you should consider fixing your bills.

Published - 12 Jun 2024

There’s good news if you’re squeezed by gas and electricity bills: the Ofgem price cap will fall by 7% from 1 July until the end of September this year, bringing energy prices down.

The average household will now be paying £1,568 a year, meaning a drop of £122 for those on a dual-fuel bill. This comes after prices descended 12% in April, hopefully meaning the end of the spiralling energy costs that began in 2021.

Dr Craig Lowrey, Principal Consultant at independent energy research company Cornwall Insight says this change is “a welcome relief for consumers after a challenging period of high energy costs.”

But he warns that energy prices will continue to vary in winter with little chance of a return to pre-2022 levels.

“The anticipated rise in bills as we move into the winter months emphasises the continued volatility of the market and the importance of providing protection for vulnerable households,” he says. “It’s clear the cap in its current form is not going to bring down bills to pre-crisis levels.”

The drop in costs means that some energy suppliers are starting to offer customers fixed-rate deals to lock them in for a year or two – but will you truly save money by setting your gas and electricity bills for the months ahead?

What is the energy price cap?

The energy price cap sets the maximum amount suppliers can bill customers, for standing charges and each unit of energy, who are on a ‘standard variable tariff’ (SVT) (i.e., the default amount each energy company bills for its supply).

As mentioned, from 1 July the energy price cap will fall to £1,568 a year (from £1,690) for those paying by direct debit, or £1,688 if you’re just paying for what you use.

The figure is based on the average household’s use – the actual amount you pay will depend on the amount of energy you use, where you live and the type of meter you have.

Under the new price cap, direct debit customers will pay a maximum of 5.48p per kWh for gas (down from 6.04p), and 22.3p per kWh for electricity (down from 24.5p).

If you’re already on a fixed-rate deal with a supplier, then you could currently be paying more than that for your energy.

However, this is unlikely, as such offers began to get withdrawn by late 2021, when the price of energy rose sharply.

What is a fixed-rate deal?

Most households are currently paying their supplier’s SVT – if this includes you, it means the rates you pay for your gas and electricity will change every three months in line with Ofgem’s energy price cap.

If you switch to a fixed-rate tariff, the rates you pay are locked in for the length of the contract – typically for one or two years.

But fixing isn’t without risk. Although the cap will drop in July, no one can confidently predict where prices will go over the next year. If the price cap drops further, you could be locked into a deal when better offers are on the market, so choosing when to fix can be tricky.

You should also be mindful of exit fees if you’re locked into a contract and want to leave early, as they can be more than £100 per fuel.

A person sat reading their energy bill — Shutterstock / Monkey Business Images

A summer of lower bills

The first thing to consider, when deciding to fix, is how much your energy use would cost under the new price cap, to give an idea of whether other deals could save you money.

Natalie Hitchins, Which? Home Products and Services Editor, says: "If you're on a variable tariff, then any reductions to the price cap will be automatically applied in July.

“If you’re on a fixed deal and think you might be paying more than the price cap come the summer, then it's worth checking the exit fees to see if you'd save money by leaving early.”

If you’re on an SVT, then make sure you send your meter reading to your supplier on 1 July, as it will then be able to accurately know how much energy you’ve been using at the lower rate, rather than estimating (which could cost you money).

If you have a smart meter, then you won’t need to do anything, as it should be sending your readings in automatically.

Gareth Kloet, Energy Expert for price comparison site Go Compare, says: “If you can’t take a meter reading on that date, take it as close to that day. Phone or email it into your energy supplier and take a photograph (if you don’t have a smart meter) and keep it as proof.”

The energy price crystal ball

One of the biggest difficulties when it comes to choosing a fixed-rate energy deal is predicting what will happen to prices over the coming year (or two).

While experts suggest it’s likely to rise in the winter, it’s hard to say exactly by how much, as it depends on a variety of factors, such as supply levels, weather or global events.

Cornwall Insight suggests, due to the increase in wholesale energy costs, that the price cap will rise to £1,761 from October, remaining at a similar level from January 2025.

“The expectation from Cornwall Insight is that [the price cap] is going to rise again and they’re very good at predicting what will happen. The next price cap from October is likely to be an increase of around 12%,” says Kloet.

“Gas and electricity are [usually] cheaper in the summer months, but anything can happen. When Russia invaded Ukraine, we saw energy prices spike. Wholesale prices now are good, and the trend is downward, but they could go up again as we approach winter.”

So, should I switch energy tariffs now or wait?

Without knowing how high energy prices will be in the next year, it’s impossible to know whether you’re going to be getting the most cost-effective deal by fixing your tariff now.

“Based on the information we have, there are small savings to be made by choosing a fixed-rate deal],” says Kloet.

“If you’re on a very tight budget, fixing is often a good option because you can protect yourself against sudden bill increases, but bear in mind you won’t take advantage of any price decreases.”

It’s important to make your choices based on what you are comfortable paying rather than trying to ‘time’ the energy market and make the biggest cost saving.

However, if you’re looking to reduce your bills, it’s important not to feel rushed into deciding.

“Compared to the price cap effective from 1 July, the deals aren’t that good at the moment,” says Kloet.

“Energy suppliers’ prices change regularly, so if you’re browsing and you decide not to switch you can always come back and have another look in a week or in a couple of months’ time.

“Even though prices are high now, my suspicion is that new, more competitive tariffs might be available after the next price cap is announced [on 27 August].”

If you’re still unsure about whether to fix your energy bills, the smartest thing to do is keep an eye on price comparison websites in the coming weeks and see how costs will change.

If you know your budget and see a deal that would give you fixed bills that fit into it, you might take the stability of cost rather than trying to guess whether things will be cheaper in the months ahead.

What can I do if I’m struggling to pay my bills?

If you’re finding it hard to pay your energy bills, the first step is to speak to your supplier, as rules state they must work with you to find a payment plan that’s affordable.

If you’re worried about anything else, or want more information, you can also contact Citizens Advice, either through the site or using its consumer helpline on 0808 223 1133.

Key takeaways

While energy prices are dropping, it’s impossible to accurately predict how they’ll change in the coming months, making it hard to know whether to fix.
Knowing how much energy you use, and how much you’d ideally like to pay, is key when deciding when to fix.
Monitor price comparison websites regularly and see if any deals appear that would fit into your budget for the next 12-24 months.