‘Future-proof’ your energy bill with a fixed price plan

With speculation mounting over a winter price hike, plus uncertainty over how suppliers will react to Labour's price freeze pledge, consumers are being urged to ‘future-proof' their energy bills by signing up to a competitive fixed price plan today.

Previously consumers had to weigh up the benefits of fixed price tariffs as they were typically more expensive than suppliers' ‘best buy' plans, says uSwitch.com, the independent and impartial price comparison service. However, this year a number of fixed price deals are in the ‘best buy' tables, giving consumers the best of both worlds - a cheap price today, plus protection against price hikes tomorrow.
 
In fact, five of the big six suppliers have a fixed price energy tariff as their most competitive deal. The cheapest of these is npower's Online Price Fix November 2014 which freezes prices until the end of November 2014 and costs £1,182 a year - just £66 more than the cheapest variable priced plan on the market. This small difference could be wiped out by a price hike of as little as 6%.
 
However, small supplier First Utility offers the cheapest fixed price tariff on the market. At £1,170 a year it costs just £54 a year more than the cheapest overall deal, but protects against price hikes until the 30th April, 2015. Again, the small additional cost for protection would be wiped out by a price hike of as little as 4.8%.
 
While fixed priced tariffs are marginally more expensive than the very cheapest deals on the market, they compare a lot more favourably against suppliers' standard tariffs. The average fixed price tariff today costs £1,269 a year - £84 a year cheaper than the big six suppliers'  standard ‘cash and cheque' tariffs. However, the longer the term of the ‘fix', the more expensive the plan becomes.
 
The longest-fixed term plan on the market is npower's Price Protector March 2017 which freezes prices for around three and a half years and carries no exit penalties. It costs £1,341 a year, making it just £12 a year dearer than the average standard tariff for cash and cheque customers.
 
But, while those on the fixed price tariff will not see any price hikes for three winters, the same cannot be said of those on a standard tariff. A 10% price hike would see their average bill rocket to £1,488 a year - leaving them £147 a year worse off than those on the fixed price plan.
 
And of course, over three and a half years consumers could see more than one round of price hikes. If prices increased by 20%, taking the typical standard tariff to £1,624 a year, those on npower's price protection plan would be paying £283 a year less. A 30% increase would stretch this saving to an incredible £418 a year.
 
In previous years, consumers signing up to a longer-term fixed price plan were gambling on prices not falling. Not only would this make their tariff less competitive, but they faced exit penalties too if they wanted to switch to a better deal. However, this concern has been lifted with some suppliers offering plans without cancellation charges. For example, EDF Energy's Blue+Price Freeeeze November 2016 costs £1,350 a year and leaves customers free to move on should prices fall in the future or a more attractive deal come onto the market.
 
For those currently paying by cash and cheque, moving to a fixed price tariff would mean changing to paying by direct debit. But this too is no bad thing as it allows households to spread the cost of their energy use evenly across the year. This will be an additional benefit for households choosing a fixed price deal because they are on a tight budget.
 
Ann Robinson, Director of Consumer Policy at uSwitch.com, says: "The dice are loaded in favour of price hikes this winter, which makes the protection offered by fixed price energy tariffs even more attractive. Importantly, these tariffs are currently very competitive, which means that consumers don't have to pay more for the security they provide. This is competition at its best.
 
"While most consumers are cost-conscious and therefore probably tempted to take the cheapest fixed price deal they can find, I would urge them to think longer-term too. The longest fixed price tariff will future-proof your bills for over three years. This means freezing your energy costs for three winters, giving you security and certainty in very uncertain times.
 
"The market isn't perfect, but the range of attractive fixed price deals around at the moment demonstrates what a truly healthy competitive market could deliver for consumers if given the chance. This is why Ofgem's reforms are so important - they are an opportunity to finally give consumers the market they need and deserve."