With Cornwall Insights predicting another 70-80% rise to the energy price cap in October 2022, a rise that comes just 6 months after it rose by 54%, many are wondering what the best solution is to soaring energy bills.
But, with the market so volatile, is now the time to fix my energy bills?
How Much Will Energy Bills Rise?
The energy price cap is seen as a way to regulate energy bills. However, soaring wholesale gas prices have resulted in the price cap rising by unprecedented levels.
Consumers saw a steep 54% rise in the energy price cap in April 2022 and the latest predictions from Cornwall Insight estimate that the cap will rise a further 82% in October 2022. Predictions also show that the price cap will then rise a further 19% in January 2023 putting energy bills to £4,266/year on typical use. While this is of course an estimate, these figures have been accurate in the past.
Most consumers are now on the price cap as opposed to a fixed tariff as it has become cheaper than tariffs that consumers are offering.
To find out more about what the price cap means and how it effects your energy bills, read our previous article here .
Should I Fix My Energy Bill?
Traditionally, the advice to most households to save money on energy bills would be to go on a fixed tariff and switch this yearly depending on the cheapest rate on comparison sites.
Due to rises in wholesale gas prices however no competitive fixed tariffs have been available with the price cap being a cheaper option for most once their tariff ends.
However, with energy prices set to rise further come October many are wondering whether now is the time to fix. As with most aspects relating to the cost of living at the moment, it’s not wholly black and white.
The cost-of-living crisis has thrown even the most stringent of budgets into disarray with regular price rises across fuel, food and energy bills making it difficult to budget in the longer term. Fixing your energy bills now may provide you with some stability: you can plan for their – albeit still higher – costs and avoid the horrific headlines that center around now quarterly price cap increases.
More expensive in the short term
No fixed rate tariff is currently cheaper than the price cap. Nor are they likely to be cheaper than the expected rise in October 2022. Therefore, fixing your energy tariff is likely to make your monthly bills more expensive in the short term. However, by fixing now, ahead of January 2023 rises and any other potential rises in April 2023 – although bear in mind these predictions are uncertain – you MAY save in the longer term.
With this in mind, however, it is incredibly hard for the majority of households to find any extra funds to go towards energy bills in the shorter term due to many living beyond their income even before these next set of rises.
Can I find a cheap fixed tariff?
The short answer is no. There are no meaningfully cheaper energy tariffs out there at the moment. However, as you will pay roughly 96% more on your energy bills over the next 12 months, it may be worth considering going onto a tariff that is no more than 95% above your current price-capped tariff, or 100% more if you very strongly value budgeting certainty. Martin Lewis’ guide and accompanying video explains this in more detail and has some further information on what tariffs are currently available at the time of writing.
It must be stressed that fixing on a tariff now to gain some level of stability over your energy bills and in a bid to avoid steeper rises on the horizon is a bit of a gamble. With the market so volatile no one can predict accurately what energy rates will rise or fall to in the next 12 months. Likewise, if you are struggling to pay your energy bills it is worth looking into what other help with your energy bills is available before making risk decisions on fixed tariffs.
If you are alarmed by the most recent price cap predictions and are struggling with the overall cost of living crisis, read our guide to see what help is available for you. Alternatively, if you are struggling to pay your rising bills and are falling into problem debt as a result, use our online tool to get free online debt advice to help you get back on track.