Ovo launches one-year fixed tariff – Martin Lewis gives his quick analysis on if it's worth considering
Almost every household has been charged the same price for their energy over the last year under the Energy Price Cap (EPC) and the Energy Price Guarantee (EPG), with no cheaper fixed deals to switch to. That has now changed, with Ovo launching a one-year fix for existing customers that undercuts the EPG level of £2,500 a year. Here's what you need to know...
Falling wholesale prices means firms are now looking at coming back into the switching market, with Ovo first out of the blocks. But with bills expected to fall in July, we look at whether this deal is worth considering.
Tariff: Ovo 1 Year Fixed 23 March 2023 - available as dual-fuel, electricity only, or Economy 7
Price: On average 9% cheaper than the current Energy Price Guarantee – so for someone on the rather meaningless typical use figure, £2,275 a year compared to the £2,500/year Price Guarantee (actual bill and rate depends on use and region)
Early exit fees: £150 for dual-fuel (£75 for electricity-only)
Who can get it: Available to existing Ovo customers through your online account (or for non-Ovo customers as well through MoneySuperMarket if you registered for its energy alerts). You must pay by Direct Debit
Martin: 'People need to be careful and not just jump on a fix because it costs less than they're paying now'
MSE founder Martin Lewis explains what to watch out for and how the deal stacks up...
Martin Lewis, founder of MoneySavingExpert, said: "People need to be very careful not to just jump on a fix because it costs less than they're paying right now. If you're on a standard tariff, the rates you pay are governed by a cap. That cap is currently set by the Energy Price Guarantee, and will stay roughly stable until the end of June.
"After that, because wholesale rates – the rates energy firms pay – have dropped, it's likely the Price Cap will drop, and on current predictions that means you'll start paying 20% lower rates than now. That price is predicted to stay around that point until the end of the year, and into early 2024, though it changes every three months and the further ahead you get, the hazier the crystal ball gets.
"So based on those predictions, unless a fix is more than 15% cheaper than your current standard tariff – and this one isn't – it's unlikely to be cheaper over the year. Having said that, these are just predictions, things can change rapidly, and the one advantage of a fix is you get price certainty, so if you really value that, you may decide to fix even at a higher rate.
"As an aside, it's worth knowing the Government has a limit in place on how much the cap can rise to in the worst case scenario (a cap on the cap, if you like). So if wholesale rates were to explode again – which isn't currently seen as likely – the maximum the rate could rise until April 2024 is 20% more than the current price."
Watch Martin's energy video briefing for an update on the energy market and what he expects to happen with fixed deals (filmed before this fixed deal from Ovo launched).
Energy prices are expected to fall over the next year
While the Ovo one-year fixed deal at £2,275 a year for a typical household is cheaper than the current EPG level of £2,500 a year (which most homes are now on), falling wholesale prices means in July the Price Cap is predicted to drop below the Price Guarantee and stay below that level into 2024.
Price Cap dates | Typical annual dual-fuel direct debit bill (1) |
|---|---|
Ovo Energy 1 Year Fixed 23 March 2023 | £2,275 |
Current Energy Price Guarantee1 April 2023 to 30 June 2023 | £2,500 |
1 July 2023 to 30 September 2023Price Cap prediction | £2,001 (2) |
1 October 2023 to 31 December 2023Price Cap prediction | £2,024 (2) |
(1) Based on annual gas consumption of 12,000kWh and annual electricity consumption of 2,900kWh. (2) According to the latest prediction (on 24 March 2023) from analysts at Cornwall Insight. | |
For more on how the EPG and the EPC work, read our Energy Price Guarantee need-to-knows and What is the Energy Price Cap? guides. You can also use our Energy Price Guarantee calculator to see how much you'll be paying from April 2023.
What you should be doing now to help yourself
There are three areas to focus on...
Try to cut your energy usage. There are lots of ways to easily reduce what you use. Try our new interactive energy-saving tool, where you can click around a virtual house to find out how much appliances cost to run and how to cut back. Also, see our Energy saving tips guide, the Energy mythbusters guide for less clear-cut issues, and our Heat the human guide.
Check you're paying the right amount. You can use our Energy Price Guarantee calculator to see how much you'll pay from April.
Have you got all the help you qualify for? First check you've got the £400 help all households are eligible for – important as some on prepay meters haven't claimed theirs. If you can't pay, check our Struggling to pay – energy help guide.
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3 December 2024
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