In this guide, we’ll examine both sides and help you determine which option is best for you. We’ll also explain how the Business Energy Comparison website can help you bring costs dowm.
Should I Fix My Energy Prices Until 2024?
You should fix your energy prices if you want peace of mind. Fixing your energy price now will ensure you pay the same price for gas and electricity per unit until 2024. On the other hand, it may work out better for you to stick to variable tariffs. With a variable energy tariff, you could end up paying less for your energy than someone on a fixed rate.
In November 2022, it was announced that the Energy Price Guarantee will be extended between April 2023 and April 2024. This means that all bills will continue to be capped. However, the price they will be capped is up for debate. Currently set at £2,500, the cap could increase by 20% come April. However, this price may fall again come July.
Clearly, the answer to whether or not you should fix your energy prices greatly depends. Fixing your energy prices may appear as the most secure option. However, it could result in you taking the biggest gamble on the long-term price of your energy bills.
What Is The Current Price Cap?
The energy price cap is guaranteed to remain at £2,500 until April 2023.
This means that the price of energy is currently at:
- 10.3p/kWh for gas
- 34.0p/kWh for electricity
Most households spend, on average, £208 a month on energy. Without this price cap in place, households would be paying £4,279 per year for energy. This is almost 50% more than they are currently paying, thanks to the price cap.
Although the Energy Price Guarantee has been extended until April 2024, energy prices will increase by 20% after April. This takes the Energy Price Guarantee from £2,500 to £3,000, which could see households paying around £250 per month for energy. In worst cases, households could end up spending 48% more on bills.
This clearly puts a lot of pressure on homes around the country and forces many into a state of ‘fuel poverty.’ This expression is used to describe an individual who is paying more than 10% of their income towards energy bills.
Before, staying on a variable energy tariff was clearly the best decision. Knowing that your annual bills would not exceed £2,500, staying variable made the most sense. However, with this 20% price hike, it’s worth reconsidering a fixed tariff.
What is the Energy Price Cap, and How Does it Affect Me?
The price cap – now referred to as ‘the Energy Price Guarantee‘ – is a limit the government has imposed on how much an energy supplier can charge for energy bills. At the advent of the ongoing fuel crisis, the government first introduced a price cap in October 2022. It was originally scheduled to run til April 2023 but has been extended by a year.
This price cap does not imply that every household and business pays the same price for their bills each month. The price you pay for energy is still based on how much energy you use per month. Your bill reflects how much energy you use per kilowatt hour (kWh).
Ofgem (The Office of Gas and Electricity Markets) is the regulatory body for electricity and natural gas prices. To cater to the volatile energy price market, they made many changes to the energy price cap throughout 2022. Particularly, they made sure that the price cap would be updated quarterly instead of every six months.
Ofgem is constantly monitoring tariffs imposed by energy suppliers to make sure they comply with the current price cap.
For the latest news on the Energy Price Guarantee, you should visit the Ofgem website.
How does the price cap affect me?
There has been an energy price cap in place for a while. However, in the face of mounting energy prices, the Energy Price Guarantee has been put in place to protect people.
The price cap guarantee prevents the price of your fuel from exceeding a specified limit. It works to ensure that people on a variable energy tariff don’t get completely ripped off by their energy supplier.
You will be able to benefit from the price cap if you pay for a variable tariff using direct debit, standard credit, or a prepayment meter. The price cap also benefits those who use an Economy 7 (E7) meter.
However, if you use more energy than necessary, you will be charged more on energy bills. Compare business gas prices and electricity deals now.
Does the Price Cap Apply to Businesses?
Unfortunately, the price cap only applies to households. So, businesses need to face volatile energy prices for the foreseeable. Many businesses have had to deal with the brunt of the energy crisis because of this. Residential energy prices have been capped. So, to make up for it, energy suppliers have increased the price of business energy to make up for it.
Businesses have become easy targets for suppliers. Some businesses have witnessed their energy prices increase as highly as 70p/kWh. Not only has this made operations more difficult, but it has also been the direct cause of many businesses closing their doors for good. Opting for a fixed tariff may be the only option for some businesses today.
Should My Business Fix its Energy Prices Until 2024?
It is definitely worth considering getting a fixed energy deal for your business until 2024. With no form of energy cap benefiting businesses, there’s little else in the way to shield your business from further increases that are expected to occur throughout 2023.
Whether you’re currently on a variable tariff or a fixed rate deal, Business Energy Comparison can help you find a better rate for your business. We specialise in helping businesses compare energy deals and find the one that best meets their requirements.
Whether you need a new fixed-rate electricity or gas tariff, let our experts compile a list of the best deals of the day. Energy deals fluctuate as much as energy prices, which is why it’s important to seek professional help. We can alleviate the stress and move your business onto a more affordable future.
The Energy Bills Discount Scheme
From April 2023, businesses across the UK can benefit from the Energy Bills Discount Scheme. This scheme aims to discount businesses (shops, charities, and the public sector) that are paying massively for non-domestic energy.
This scheme can offer businesses a discount of up to £6.97 per MWh for gas. It will also offer a maximum discount of £19.61 per MWh for electricity. It is scheduled to run from the 1st of April 2023 to the 31st of March 2024.
However, like all government aid, this scheme will come to an end eventually. It may be more beneficial to opt for a fixed tariff that outlasts this discount scheme.
Why You Should Fix Energy Prices Until 2024
Before the energy crisis hit, switching to a fixed energy deal would be the most logical way to save money. However, things got a lot more confusing when the cost of energy went up.
Given how volatile energy prices currently are, sticking to variable tariffs could work out to your benefit. On top of being protected by the price cap, you may also benefit from lowering fuel prices in the future – if that ever actually happens.
Still, it’s worth checking what fixed-rate tariffs are available to you to assess whether it’s worth taking the risk. The main pros of fixing your energy prices until 2024 are as follows:
You may find a cheap tariff
If you find a cheaper tariff than the government’s Energy Price Guarantee, then you should go for it. However, the prospect of finding a cheaper tariff is becoming increasingly difficult and basically impossible in some cases. However, it’s definitely worth looking at – just in case!
It’s always worth checking with your current energy supplier for fixed rates. They may be willing to offer an affordable fixed-rate deal to those who are already with the company.
The energy grant is ending
Since October 2022, all households have been able to take advantage of the £400 energy grant. This grant was given to households across England, Wales, and Scotland. It was paid out incrementally over the months following October. This helped some homes save up to £67 on their monthly energy prices.
However, this scheme is scheduled to end in March 2023. Therefore, with no discount in place, it may be worthwhile for some households to switch to a fixed tariff.
Some energy providers are offering a one-year tariff
The biggest downside of getting a fixed-rate tariff is having to pay the exact same rate for energy until the tariff ends. This is a disadvantage as it could mean you miss out on the drop in energy prices in the future, resulting in you paying more than you have to in the long run.
To secure more fixed-rate customers, some energy providers are offering a one-year tariff contract. This will at least see you through the uncertainty of 2023. By agreeing to a fixed rate now, your business won’t have to worry about the price increase that will happen in the coming year.
Peace of mind
The way things are looking, energy prices are going to remain volatile for the foreseeable. By securing a fixed tariff, you gain peace of mind that you’ll be paying the same rate for energy throughout these uncertain times. This way, you can effectively budget for the coming year, knowing exactly how much you need to spend on energy.
Why You Shouldn’t Fix Your Energy Prices until 2024
As a homeowner, there are plenty of reasons why you shouldn’t fix your energy prices now.
Difficult to find a fixed rate tariff in 2023
With the end of the energy crisis being uncertain, your options for fixed-rate tariffs are slim. Even when you find one, it will likely have high exit fees and other strict terms and conditions. The best chance of you finding a fixed-rate deal in 2023 would be to look to the major suppliers. This includes the following:
- Shell Energy
- Octopus Energy
- EDF Energy
- Scottish Power
- British Gas
Smaller companies simply don’t have the confidence to offer fixed tariffs at this time.
You’ll have to pay a high tariff
As aforementioned, it’s unlikely that you’ll get a deal that’s lower than the current price cap. So, you’ll be forced to pay a high tariff. Not only that, but you’ll have to pay this same high tariff for at least a year. While year-long fixed tariffs are available, you may have to settle for a 2-year or 3-year contract.
If you are to believe the likes of Cornwall Insight, energy prices will go down in 2023. If this were to happen, homeowners who stuck to variable tariffs could end up paying less for their gas and electricity bills. You wouldn’t be able to take advantage of this price drop in the energy market if you agreed to a fixed tariff.
Exit fees are used by energy suppliers to prevent homeowners from quitting their gas and electricity tariffs early. If wholesale energy prices drop and you want to get out of your fixed energy tariff, you’ll have to first pay the exit fee.
Exit fees are always a major downside of fixed energy tariffs. However, they’ve become even more restricting throughout the energy crisis. In June of 2022, it was reported that exit fees had increased massively. In some instances, homeowners were facing exit fee increases of 10 times the initial cost. This saw some individuals paying £600 instead of £60 in exit fees.
So, a major downside of getting a fixed tariff in 2023 would be the huge exit fees you may have to pay.
What Will Happen to UK Energy Prices in 2023?
As aforementioned, energy prices are predicted to increase come April 2023. Since the 1st of January 2023, many households have already seen an increase in their energy prices. Energy Savings Trust predicts that energy prices will remain consistently high right through to 2024.
On the other hand, industry analysts at Cornwall Insight have predicted that energy prices will fall below the price cap by July 2023. By the second half of 2023, Cornwall Insight suggests that energy bills for a typical household will fall to around £2,800. These analysts are predicting this price decrease as a result of the falling wholesale energy prices.
Despite these findings, it’s impossible to say whether or not this fall will definitely happen. We won’t have an indication until the second half of 2023. This is because energy providers purchase energy ahead of time. Daily falling prices don’t really reflect anything, as energy firms buy in advance.
Plus, £2,800 is still an extortionate amount to pay for annual energy usage. It’s twice as much as the 2021 energy cap. Therefore, the government may extend the current price cap further into 2024 than is currently planned. They may also introduce additional financial aid for those who are struggling, but we’ll have to wait and see.
On the whole, it’s safe to say that more difficult times lie ahead throughout 2023 and into 2024.
The current energy price cap will only last until the 1st of April, 2023. After which, energy costs are set to soar, and a less favourable price cap will be put in place. So, should you reconsider the deal you have with your current energy supplier? Should you get an energy tariff fixed deal?
Agreeing to a fixed energy tariff could help you save money in the long run. The energy market is likely to get better before it gets worse. Getting a fixed tariff from an energy supplier will keep your bills consistent throughout the rest of the cost of living crisis. You won’t suffer as the energy prices continue to climb (if they do!).
At the same time, gas and electricity prices could drop come July 2023. If this were to be the case, the fixed deal with your energy supplier might not be as economical as you hoped.
Either way, it’s worth your time to check out fixed-rate deals that are available to you. Before the end of the current Energy Price Guarantee, let Business Energy Comparison find you a better deal.
Frequently Asked Questions
How long should I fix my energy prices for?
If you decide to fix your energy prices in 2023, we’d recommend only fixing them in the short term. Ideally, 12 months would be your best bet, but 2 years would also be acceptable. Once your 12-month tariff is up in 2024, there’ll likely be cheaper tariff options available. So, you could switch at this point to receive a bigger discount.
Why are energy prices so high in 2023?
The energy crisis that the UK is currently facing is the result of several reasons, from the Russian invasion of Ukraine to dwindling resources. After Europe imposed sanctions, Russia cut the Nord Stream 1 pipeline. This resulted in less gas going around, resulting in soaring prices. Additionally, the UK has used up all its natural gas resources, so it has to import.
How long will the cost of living crisis last?
The length of time it will take for the cost of living crisis to end is up for debate. It’s not a case of asking the experts, as it depends entirely on which experts you ask. Both the Bank of England and the Energy Saving Trust believe that prices will lower throughout 2023 and eventually fall in 2024.
However, other experts believe the cost of living crisis will go on til the next decade. It may take us until 2030 for prices to resemble what they did pre-pandemic (with inflation taken into account).
Business Energy Comparison
Corby Innovation Hub,
Corby, NN17 1NN
0800 007 4001
Trading name of Utility Bidder