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Should I fix my energy prices until 2023?

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Should I fix my energy prices until 2023?

The latest Cornwall Insight forecast, based on Ofgem‘s new methodology, is an 81% price cap rise in October 2022, causing a typical energy bill to £3,582 a year and a further 19% in January 2023 to £4,266 a year!

The 2022 April price cap increase for the average household was £1,971 and the predictions for October 2022 are to be significantly more than £3,000. These predictions may fluctuate but are close to correct previously.

Energy prices continue to soar at unprecedented rates, we recommend you fix your energy until 2023 with a fixed energy tariff which is cheaper than the October price cap.

Due to the energy crisis, energy prices constantly fluctuate, making it difficult for customers to secure a cheaper deal, but we recommend you secure these deals whilst they are available. Check out our business insights page to discover more about the latest energy market news.

We understand that fixing your electricity bill does mean that you may be paying slightly more than the price cap now but after the next price cap increase, you will be paying cheaper energy rates.

Within this guide, we will detail why energy prices are rising and what your options are.

Business gas prices have recently hit unprecedented levels. This rate hike has been caused by the volatility of the wholesale gas market. Prices reached an all-time high in December 2021. This has continued into 2022 and is expected to carry on through until 2023.

Depleted gas reserves because of bad winters and increased usage during the pandemic, coupled with the ongoing conflict in Ukraine have had and will continue to have a significant impact on pricing.

Why are UK energy prices so high?

Wholesale prices have skyrocketed since autumn 2021 due to multiple factors such as geopolitical factors, supply issues, COVID restrictions and the Russian invasion of Ukraine to name a few.

The UK has been hugely affected by rising energy costs due to our high gas and electricity usage and lower storage than some other nations.

The invasion of Ukraine has caused Europe to realise how reliant they are on Russian energy and has also been a major factor in energy price hikes. Furthermore, this has also affected wholesale gas prices as Russia previously supplied 40% of Europe’s gas. Over the last few months, we have seen that Gazprom has been reducing gas supplies via the Nord Stream pipeline, which accounts for more than a third of Russian natural gas exports to the European Union.

We are seeing prices triple compared to what businesses would have paid a couple of years ago and trends suggest there is no end in sight to the cost of wholesale prices.

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In April and October each year the energy regulator, Ofgem reviews the energy price cap, which limits the amount energy suppliers can charge for gas and electricity. Although the energy price cap is for domestic customers this has a huge effect on business customers too.

The purpose of the energy price cap is to protect customers on default standard variable tariffs from unprecedented price rises. Although the price cap is not the maximum a household can be charged, it is completely dependent on your energy usage.

In April 2022, the price cap was reviewed after a turbulent start to the year. The price cap was at £693 and was increased to £1,971 for an average household. The current price cap will be reviewed again in October 2022, and it is forecasted to rise by 81% to £3,582.

Does the price cap apply to businesses?

Unfortunately, the current price cap only protects domestic customers and there is currently no price cap for business customers.

To combat the huge increases in energy costs. some energy companies are passing on the costs to business gas and electricity prices. Continue reading to find out how you can reduce your business energy tariffs.

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How does the energy price cap affect my business?

The energy price cap places a limit on the amount energy suppliers can charge domestic customers on default tariffs. The price per kWh and standing charges are included within the cap.

Your supplier will charge you accurately based on your gas and electricity usage so the more energy you use, the more expensive your electricity bill will be.

The price cap doesn’t apply to you if:

  • You are already signed up for a fixed energy tariff
  • You are signed up to your supplier’s standard variable tariff

The latest news suggested that Ofgem may consider reviewing the price cap every 3 months rather than every 6 months, we will provide our customers with an update on this once further information has been released.

What is predicted to happen to UK energy prices in 2023?

Energy costs have spiked continuously throughout the year reaching record-breaking highs. What we do know is that energy prices are going to continue to stay high and this is likely to be the case during 2023, therefore we recommend you fix your energy prices until 2023.

Energy prices are expected to peak in 2023 so prices may decrease slightly during the year, but these soaring prices are still going to be considerably increased compared to the prices businesses would have paid a few years ago.

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Advantages of fixing your energy prices until 2023

Should I fix my energy prices? Fixing your energy rates until 2023 supplies stability and price certainty to businesses as it protects against future price hikes. Knowing that you will be paying the same unit rate will supply peace of mind during these turbulent times.

We recommend that customers look at their fixed rate tariff and compare this to the October price cap increase. The increase in October 2022 is expected to rise to £3,400 a year so if your fixed deal is around 40-45% more expensive than your current deal you may fall under this.

Disadvantages of fixing your energy prices until 2023

Energy providers are having to protect themselves by increasing the rates on fixed-price deals. Agreeing to a fixed rate tariff for your domestic energy could end up with you paying more than you need to. Cheap fixed tariffs are disappearing quickly, and your energy supplier will only allow a small number of customers to sign up for these tariffs.

The best way to find these cheaper deals is to compare the market. Let Business energy comparison do the challenging work for you, we can compare energy deals from the UK’s leading energy suppliers to find the best deal for you.

What are the several types of gas and electricity tariffs?

Fixed tariffs are not the only type of tariff on the market. There are a variety of different contract types available including:

01 Fixed tariff

Your rate will not change throughout the entirety of your contract whilst on a fixed energy tariff.

02 Variable tariff

Your rate may fluctuate whilst on a variable contract depending on the market conditions at the time.

03 Price capped tariff

Your rate and standing charge can decrease but not increase on a price capped tariff.

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Can you save money by fixing your energy prices?

The answer to whether you can save money by fixing your energy prices depends entirely on the market conditions at the time.

Fixed energy contracts are known to be one of the cheapest tariffs on the market. If energy prices begin to drop, it may be possible to find a cheaper variable contract, but we don’t believe prices will drop anytime soon. It is important to remember, that if you are on a variable tariff and prices increase, your energy supplier will charge you a higher price as your unit rate is not fixed.

What should I do if my fixed energy tariff is due to expire – Should I fix my energy prices again?

If you are currently locked into a fixed tariff, you are in the best position now. Once your fixed energy tariffs expired, your current energy supplier will place you on a variable tariff which is known to be expensive.

When your energy tariffs expire, this is your time to search the energy market for a better deal. We can help your business compare prices from the UK’s leading energy suppliers to help find you a fixed tariff.

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What is the government doing to help with energy price rises?

If you are struggling to pay your energy bills, there is help available. The government has recently announced schemes and grants due to rising energy bills. These schemes include:

  • Winter fuel payment
  • Warm home discount
  • Energy supplier grants
  • Fuel vouchers
  • One payment of £400 to your energy account
  • Recieve £150 if you pay your council tax

How to reduce your business energy bills?

Reducing your electricity consumption is a fantastic way to reduce your energy bills and there are many straightforward ways in which you can do this. Do you know how much energy your business is using? Find out below how you can reduce your energy costs:

  • Watch your thermostat settings
  • Embrace natural daylight
  • Consider your water usage
  • Switch to LED bulbs
  • If you’re not using it, unplug it!
  • Shut windows during the day
  • Use fans wisely
  • Avoid peak energy times
  • Check your air conditioning
  • Replace your air filter
  • Get an energy-efficient dehumidifier
  • Switch energy provider
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How to find the best business energy deal?

The best way to find the best energy deal is to compare the energy market and fix energy prices as soon as you can. This will protect you against any further price rises as we are all unsure what will happen to energy prices in the next few years. Due to the current energy crisis, we recommend you fix your energy prices until 2023. Contact us today to speak to one of our energy experts, ready to answer your questions.