Cheap energy deals disappear as lowest one-year fix climbs £70+/year
Cheap energy deals are disappearing fast with the lowest fixed deal up by more than £70/year since this time last month, MoneySavingExpert.com can reveal.
Since the start of August, we've seen:
- The cost of the cheapest one-year fix jump by £71/yr to £938/yr.
- The average price of the top 10 cheapest rise to £932/yr, compared with £867/yr at the beginning of August – up £65.
- A sharp fall in the number of cheap deals – there were 12 costing less than £900/yr a month ago, now there's just one, a variable at £859.
This period also saw two of the big six energy firms – British Gas and Scottish Power – announce their second major price hike of the year, while smaller provider Bulb has also upped the cost of its standard tariff for the third time this year.
Our analysis at the beginning of July showed the price of the cheapest energy deal had already increased by £50/yr since the start of 2018, and was up £112/yr since July 2016 – based on typical use.
Even under regulator Ofgem's looming price cap – an upper limit suppliers can charge customers on default tariffs based on their energy use – standard variable tariffs will still be vulnerable to price changes as the level it's set at is reviewed twice a year.
Martin Lewis, founder of MoneySavingExpert.com, said Ofgem's new 'fair' tariff isn't the same as a good tariff. He said: "The savings are still pitiful compared to the amount people would get if they switched and went to the market's cheapest providers – but there is a real concern the imposition of a cap will give people a false sense of security that doing nothing is fine."
With rising energy costs, see if you can switch and save with a free Cheap Energy Club comparison.
How have prices changed?
The average price of the top 10 most competitive tariffs has increased by £65/yr since the beginning of August, our analysis shows.
Comparing a snapshot of the energy deals on the market from then also reveals the price of the cheapest fixed deal – a tariff not susceptible to price hikes for its duration – has increased by over £70/yr. A month ago, customers with typical use could have fixed prices for a year at £867 – today the cheapest fixed deal is £938/yr.
Price increases have become commonplace in the energy market this year – with multiple hikes from the majority of the big six suppliers, as well as hikes from medium-sized and smaller suppliers such as First Utility, Ovo, Co-op Energy, Tonik Energy, iSupplyEnergy, Utility Warehouse, Bulb and Outfox the Market.
We've also seen Ofgem raise the level of the existing energy price cap for prepay and vulnerable customers twice this year. Ofgem says these increases were down to higher wholesale gas and electricity costs, driven by rising global oil prices.
|Tariff||Annual cost at 10 August 2018||Annual cost at 10 September 2018|
|Cheapest tariff (variable)||£853||£859|
|Cheapest one-year fix||£867||£938|
|Average price of the top 10 cheapest deals||£867||£932|
|Based on typical annual usage figures from Ofgem: 12,000 kWh gas, 3,100 kWh electricity.|
Fixed vs variable
A fixed-price tariff essentially means the unit price you agree to pay is set for a certain period, such as one or two years, meaning it won't increase for the duration of the fix. However, these tariffs may have exit fees if you decide to switch before your fixed term ends.
Conversely, variable tariffs – as the name suggests – are subject to price changes, though energy providers must give customers at least 30 days' notice of the change in rate. They also have no exit fees. Currently, the top four cheapest deals are variable tariffs, but while they're cheap now, suppliers could hike costs down the line.
For example, Bulb has hit its customers with a third rise this year, adding a further £100+/yr to energy bills for customers with typical use. Its Vari-Fair variable tariff was in the top three cheapest before the rise but now has fallen out of the top 30 cheapest.
Standard variable tariffs are typically energy suppliers' default tariffs and are usually the most expensive. If you've never switched or your fixed deal is over, it's likely you're on one of these.
What can you do?
The best thing you can do, especially in the run-up to winter, is make sure you're on the best tariff for you. As prices vary by region and usage you'll need to do a comparison. To find your cheapest, use our Cheap Energy Club.
If you'd rather just stick with a name you know, you can use our 'big name supplier' filter.
And even if you're worried about switching firm, many can still save – though not nearly as much – by simply switching tariff with their current provider, using our 'my current supplier' filter.
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