The Current Reality of Fixed-Rate Energy
As the cost of living continues to rise, British households are grappling with the challenge of managing energy bills. The scarcity and high cost of fixed-rate energy deals have left consumers with limited options. In this article, we explore the current state of fixed-rate energy in the UK and its impact on bill payers.
The Current Situation
According to recent data from Ofgem and Cornwall Insight, the number of fixed-rate energy deals in the market is alarmingly low. With just 32 deals available for new and existing customers combined, consumers are facing a real lack of options to lock in prices and achieve stability. Most of these tariffs are still relatively expensive, offering little incentive for households to switch from variable deals.
UK households currently pay an average annual energy bill of £1,928, the typical cost for a variable-rate deal limited by the Ofgem price cap. While some fixed-rate deals are cheaper than this, the scarcity of these options has left consumers with limited opportunities to make savings.
Determining whether a fixed-rate energy deal is cost-effective involves a careful evaluation of unit rates, standing charges and current expenses. Ofgem's price cap adds a layer of uncertainty, as future adjustments could impact the overall cost of fixed options.
What Lies Ahead?
Analysts from Cornwall Insight suggest that an influx of new fixed-rate tariffs is unlikely in the near future. The Market Stabilisation Charge (MSC), in effect until 31st March, acts as a deterrent to energy providers who might otherwise offer excessively low fixed-rate deals, destabilising the market.
Additionally, the ban on ‘acquisition-only’ tariffs is a spanner in the works for the launch of more fixed-rate deals, as suppliers are now required to offer the same prices to new and existing customers.
The slow introduction of fixed-rate deals stems from the challenges faced by energy providers. The spike in wholesale energy prices in late 2021 led to the collapse of several British-based firms. As a response, surviving suppliers raised the prices of fixed-rate deals, and by September 2022, no new fixed-rate deals were available. Although these deals started popping up in the summer of 2023, their numbers have remained low and prices relatively high.
The dilemma surrounding fixed-rate energy contracts highlights the challenges faced by consumers desperate for affordable and stable energy billing. While the market is showing promising signs of improvement, the scarcity and costliness of these deals continue to cause bill payers pain.
As Ofgem evaluates the future of the MSC and the new customer pricing ban, only time will tell whether regulatory measures can pave the way for a more competitive and consumer-friendly market. Until then, households have no choice but to carefully assess their options and take advantage of support where available.
How Can I Save Money on Energy Bills?
With uncertainty over the current state of the energy market, consumers are looking for ways to save money on their energy more than ever. At UKPower, we can help you compare gas and electricity suppliers to find the cheapest energy prices, switch to a better deal and cut the cost of your energy bills.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.