Energy prices predicted to rise: should you fix?

Some analysts seem certain prices will rise in the autumn but they do not have the benefit of a crystal ball so nothing is certain (see the Cheap Gas & Electricity guide).

Price comparison website Energyhelpline.com is warning consumers of possible "record" prices. It estimates this could add about £170 to the average annual bill of £1,132.

It expects a price rise of up to 15% on energy bills as a result of the Japan earthquake as that could push up demand for gas.

Others say the conflict in Libya could bump up oil prices which, in turn, could lead to a rise in energy costs. What's more, wholesale gas prices, which energy providers pay for power, hit their highest levels since October 2008 this month.

The Big Six suppliers have all brought in average price rises of 5.9 per cent in winter, adding £62 to the average bill.

Should you fix?

The threat of rising prices has prompted some experts to suggest households fix the price they pay per unit of energy by signing up for a fixed rate tariff. Another option is a capped tariff where the price you pay can go down but it cannot rise.

These deals offer security as prices cannot rise during the fixed term, which usually stretches for a year.

The down side is fixes tend to be more expensive than variable tariffs initially so if prices don't rise you'll be paying too much.

Also, if prices do not rise for another six months, you could be paying too much in that interim period.

EDF Energy's 12-month Fixed S@ver deal is currently the cheapest fix, which costs £958 a year for an average household.

The cheapest variable deal, which is £63 a year cheaper, is British Gas's WebSaver 11 Dual Fuel plan online tariff which costs £895 a year, based on an average household's usage.

To help you decide what to do we spoke to an energy consultant and four other experts at major price comparison sites for their predictions on prices this year and the best subsequent moves for consumers.

Andrew Horstead, research manager at energy consultancy firm Utilyx, says:

"Unfortunately, it is likely energy prices will increase towards the back end of this year due to rising oil prices, as well as nuclear issues in Germany and Japan creating higher demand for energy that will change the way providers assess pricing.

"Consumers should start looking now at alternatives to their current energy tariff and perhaps fixed priced offers are also worth looking into. Ofgem's review should hopefully create a stronger energy market, putting customers in a better position to make decisions."

Paul Green, chief executive of Energyhelpline, says:

"Consumers should definitely think about signing up to fixed or capped tariffs as there has been a 10% rise in wholesale prices in the last month alone. Gas prices have also almost doubled since this time last year."Customers who want to play it safe really need to think urgently about insuring themselves against future price rises by opting for a fixed tariff deal.

"The cheapest fixed deals are only likely to rise in price as world oil and gas prices seem to be back on an upward cycle."

Phil Paterson-Fox, head of home services at Gocompare, says:

"Energy prices will almost definitely rise due to the fact that wholesale crude oil prices are increasing because of factors including the conflict in Libya and the Middle East, and there's still a strong link between oil and energy prices.

"We're already beginning to see the effects of this, with some energy providers beginning to pull their best deals from the market.

"The best thing consumers can do is to use price comparison sites, which are easy to use, to find the best deal. Or they could consider fixed rates, which offer security for consumers to budget as they know how much they're paying for energy."

Scott Byron, manager of gas and electricity at Moneysupermarket, says:

"The current trend is that prices are going up, so it would seem inevitable they will continue to rise and I would expect this to come into force this Autumn, although by how much I don't know.

"Ofgem's findings show that people aren't switching, but my advice is that if you've never switched before then you should do so at any time after finding the best tariff for you.

"If you've already switched before you'll probably have the best rate already so it's unlikely you'll need to switch again, although do keep an eye on the market for better rates."

Ann Robinson, director of consumer policy at uSwitch, says:

"Following Ofgem's report yesterday, which criticised providers for not adjusting prices according to increases and decreases in wholesale prices, the spotlight will now remain on companies for a while, so it's too early to say whether prices will rise and when.

"However, if oil prices remain high over the next few months, then I would expect energy prices to also increase later this year.

"But there are lots of good prices online and I would strongly advise consumers to shop around to find the best deal for them using price comparison sites.

"I don't think prices will go up by so much that a fixed price will be the best option, although I certainly wouldn't rule it out."

How can you cut costs?

Anyone on their provider's standard tariff is almost certainly paying too much as the typical cost of such deals is around £1,100 a year whereas the cheapest online deals start at around £900.

To find the best tariff, compare the options available via a comparison site, although be aware you need to search separately for fixed and non-fixed deals (see the Cheap Gas & Electricity guide).

The best deals are available to those who get their bills online and pay by monthly direct debit.

When switching, remember that when a firm describes its tariff as cheapest, it's based on an average and can vary massively depending on where you live.

The energy market is complicated so determining which is the cheapest provider for you depends on your location and how much power you use.

This is why a comparison, based on your circumstances, is key.

Further reading/Key links

Slash energy costs: Cheap Gas & Electricity Your rights: Fight Energy Direct Debits Capped tariff help: Is Your Cap/Fix Ending Soon? Boiler protection: Boiler Cover