Last week, energy regulator Ofgem announced further price cap increases from October.
Under it, households with standard variable tariffs will see their bills rise by an average of £3,549 – or £3,608 for those with a prepaid meter.
My phone started ringing at 7am the morning of the announcement. Since then it hasn’t stopped ringing. Everyone asks the same question: how will people pay their bills from october?
To make matters worse, the mind-boggling projections of future price increases terrify people.
People are desperate for practical and realistic solutions, but the options on the table aren’t particularly practical or realistic.
One option offered to households is to settle their energy contract. But will the repair protect you from next year’s hikes or could you end up paying more? Here is an overview of the situation – and my point of view.
How does fixing your bill work?
In normal times, setting a price for energy makes sense. Knowing that you have agreed to a monthly rate that you can afford that more or less matches your typical energy consumption can protect you from the typical price fluctuations that occur over a year or two on the energy market.
But the world has changed dramatically over the past year and repair is no longer the ‘safe’ option.
Recently I heard about people being offered limited time offers on energy pricing. The offers are amazing.
If you were paying £1,700 last year for your energy and suddenly you’re offered a £4,500 solution for a year, you know it’s not a bargain. But with some energy price projections for the average family topping £6,500 by April 2023, many are seriously considering these deals as the answer to the crisis.
The problem is that we just don’t know what the future holds. I deeply fear that some people will panic and sign deals because they fear they cannot afford further price increases – even if the fixed prices offered to them are neither feasible nor affordable.
But don’t rush into anything. Do your math before making a fixed deal.
five things things to keep in mind before getting a fixed deal
There are several things you need to weigh.
1. New government actions could be launched
A new Prime Minister is about to be announced and it is hoped that new backers will follow once they take office. This could range from the nationalization of the energy market to exceptional taxes.
If you fix it and new measures are put in place, energy prices could drop and you could find yourself locked into a much more expensive supply.
2. High release fees could make it expensive to leave a patch sooner
Exit penalties – the price you pay for breaking a contract early – were relatively manageable. But these fees are on the rise, with some suppliers charging hundreds of pounds to exit a contract mid-term (dual fuel).
Exit fees are currently under the microscope, with the telecommunications industry tell them to give it up for people in financial difficulty. For now, however, exit fees apply in the energy sector.
3. Energy rebate schemes could lower variable rates
The National Grid is developing a new scheme which will pay households to reduce their energy consumption during peak hours – usually between 5pm and 8pm in the evening.
The payments aren’t really going to make a huge dent in the cost of energy bills, but it’s possible that the energy industry will come up with other alternatives that could significantly lower the cost of the bills.
That shouldn’t preclude people with fixed-rate deals from also benefiting from these programs, but there remains the possibility that the energy industry itself could act collectively to force the price cap down. We just don’t know how it will affect people with a fixed deal.
4. Future projections are not set in stone
If you’re basing your decision to fix your energy bill on 2023 projections, know that just because previous estimates were correct doesn’t mean that’s what the future holds.
Some of the analysts I spoke to expressed skepticism about some of the 2023 estimates. is by no means robust at this stage, and will therefore be of very limited value, particularly to consumers who should always be the main priority.”
The truth is that the wholesale energy market is incredibly complex and a wide range of disparate factors affect prices.
5. Beware of scammers – if it’s too good to be true, think twice
Scammers offer people suspicious energy solutions at low prices, either pretending to be from your energy company or acting as an energy broker to get you a good deal.
You pay your monthly bill to the scammer who then pays the energy company. Only no payment is made, leaving you doubly in debt.
Be extremely careful if someone calls you (or knocks on your door) offering cheap energy solutions.
How to calculate what is best for you
Calculating whether a fix is a good deal is incredibly complicated. Typically, if you’re offered a one-year solution that means you pay no more than 130% of your current capped rate, then it might be worth considering. We’ve broken that down for you.
If you are contacted by your energy supplier to settle an energy contract, do not panic and agree.
Ask the supplier to email or post the information to you so you have time to think about the transaction and seek advice. Don’t forget to ask how much you will pay to leave the agreement early.
What if I can’t afford to pay my bill?
If you can’t afford rising energy prices – now or in the future – then take 15 minutes to draw up a basic budget covering the money you receive each month versus what you have to shell out. .
If you don’t have enough money to cover your expenses – or if you have little money left over to cover you in an emergency – you meet the definition of financial hardship.
According to Ofgem regulations, your energy supplier must offer a bespoke plan to help you. This can range from a payment plan to a bill discount. See full description of available help.
Comments are closed.