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Fixed Energy Prices: Is it right for me?

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Many of the big energy companies have recently announced large rises to their standard tariffs, meaning consumers are set to face bigger bills. As well as their variable tariffs, suppliers also have fixed energy prices, which can be a way of protecting yourself against future increases. Is this the right time to be fixing your energy prices or could it end up costing you more?

What is a fixed tariff?

With a standard or variable tariff the price you pay per unit of electricity can go up or down depending on the supplier. You might pay a set amount by Direct Debit every month, but this could go up with very little notice. With a fixed tariff your price per unit will remain the same for the duration of the contract regardless of any further increases. The length of the tariff varies, but some suppliers offer deals that are fixed for up to four years. You can still pay a set amount by Direct Debit, but this will only vary if your usage alters dramatically.

Is a fixed tariff more cost effective?

When you switch energy supplier, whether to a fixed or new variable tariff, it’s important to do your research thoroughly to ensure you’re on the right one. Use a price comparison site to see what the best deal for you is. The cheapest fixed deals will probably be with a supplier who hasn’t announced price increases yet. If you choose the right one, then it could actually cost you less than you currently pay and you’ll be protected against any future increases.

Fixed tariffs are particularly beneficial for those living on a tight budget, as you won’t face the prospect of your bills increasing substantially. If you set up a monthly direct debit, then you should end up paying the same amount every month. By budgeting correctly, you can build up credit with the supplier and protect yourself from large bills through the winter. Your direct debit amount will only alter if the amount of gas and electricity you use increases.

What to look out for with fixed tariffs?

The starting price you pay for a fixed tariff is likely to be higher than some of the other advertised products. However, with these variable tariffs you face the risk of higher energy prices in the future. There is, however, the prospect that energy prices won’t increase throughout your fixed period or they could actually decrease. This would mean you’re at a disadvantage and it could end up costing you more than the deal you’re currently on.

Fixed energy prices: Is it right for meSome suppliers have large exit fees tied to their fixed deals. If prices across the industry were to fall, you wouldn’t be able to take advantage and switch supplier without facing a big charge. It’s worth looking out for fixed deals with no exit fees, as this way you’re free to change energy supplier if there was a substantial drop in prices. If you go for a product with an exit charge attached, then it’s important you’re confident it’s the right deal. It could end up costing you more than you’ve saved if you want to leave in the middle of the fixed term.

What about a capped tariff?

If you don’t want the restrictions of a fixed tariff, then there are some capped deals about. These guarantee that the price per unit won’t go over a certain amount, but you’ll still benefit if prices fall. As these are a more flexible product, they’ll often cost more to start with than a complete fixed deal. They might be beneficial if you need to be able to budget, but don’t want to take the risk that prices could drop.

What to consider with a fixed deal?

If you’re thinking about switching to fixed energy prices, then you need to look at your current usage, how much you’re paying on your present deal and how much of an increase in prices you can afford. Your last bill will provide details of the tariff you’re on and you can use this information to see which fixed deal would be the most cost effective for you. It’s important to compare the product you’re considering with other fixed tariffs, so you’re confident you’re getting the best deal. You shouldn’t compare fixed and variable deals, as the initial tariffs will be different and you can’t take into account future price rises.

Fixed energy tariffs offer advantages for some customers, but this will depend on individual circumstances and usage levels.

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About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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