New supplier Fuse Energy launches electricity deal that undercuts the Price Cap – so should you switch?

We've detailed what you need to know below. But for full help, you should also read our guides Should I fix my energy or stay on the Price Cap? and Stick, switch or fix your energy tariff – what are your options?

Fuse Energy's new electricity-only tariff is now 13% cheaper than the Price Cap on average – more if you're a low user

Most households are currently paying the Energy Price Cap rates for their gas and electricity, which change every three months. For a household with typical use (2,900 kilowatt hours of electricity a year), paying by direct debit, electricity costs on average £1,067 a year under the Cap.

But since Friday 1 September, the new tariff from Fuse has been 13% cheaper than that – so you pay £931 a year (£136 less) for the same usage. This saving will decrease to £57 a year (or 6% less) from Sunday 1 October, when the Price Cap rates will drop. 

Most of this saving is due to Fuse Energy's lower standing charges, which are £33 a year cheaper on average than the Price Cap. Standing charges are the daily fee you pay to have your home connected to the grid.

If you're a low user, the standing charges account for a higher proportion of your bill, so there's a bigger benefit. Using the energy regulator's definition of low use (1,800 kilowatt hours a year), a low user would currently pay £639 with Fuse – a saving of 13% (7% from 1 October) over the Price Cap, which would cost £735 a year (£687 a year from 1 October).

At this level of usage, Fuse is also cheaper than the dedicated 'no standing charge' tariff from Utilita (see Martin's standing charges blog for more on this).

Need-to-knows before you decide to switch to Fuse Energy

If you're thinking of switching to Fuse, it's worth bearing the following in mind before you make the move:

• It's an app-only supplier. You'll need to download Fuse Energy's app to get a quote, start a switch and manage your account. It's available on the Apple App Store and Google Play Store. Customer service is also mostly handled through the app, though the firm told us customers can also email it on support@fuseenergy.com. Potential customers can check their rates (based on their postcode) on the firm's website before committing.

• You pay by direct debit based on the electricity you used the previous month. This is different from what you might be used to. Most other firms use fixed monthly direct debits as the default – this is where your supplier looks at what you're likely to use over the next year, and then splits your payments equally, so you pay the same amount each month (the idea is to smooth your payments out over the year and make budgeting easier).

  But Fuse uses variable direct debits, where you just pay for what you use month by month. You'll get a bill on or around the second of each month, and the bill amount will then be taken from your bank account around four days after that. It's not currently possible to change these timings. The advantage of this is you won't build up too much credit; the disadvantage is you'll need more cash in the winter months as your usage isn't smoothed out across the year.

  Fuse also doesn't currently support any other type of direct debit, nor does it support standard credit (where you pay by card, cash or cheque on receipt of a bill) or prepayment (where you top up your meter before using any energy).

• Customers are able to make one-off top-ups to their account to build credit ahead of the winter. 

  The firm has recently launched a function that allows customers to top up their account via Open Banking bank transfers.

• If you have a gas supply, you can't move that to Fuse. Fuse is an electricity-only supplier, so if you're a dual-fuel customer and want to switch to it, you'll have to deal with two suppliers and separate bills.

• It doesn't (currently) support Economy 7 or 10. Fuse's tariff is not available if you're on Economy 7 or Economy 10 for the time being. However, households that have a multi-rate meter can join Fuse on its single-rate tariff. The firm told us it is aiming to make a multi-rate tariff for Economy 7 available in the coming weeks and it will look into the possibility of adding an Economy 10 option in future.

• Fuse is not currently part of the Warm Home Discount scheme. As Fuse is a new supplier (it had less than 1,000 customers as at December 2022), it is not obliged to be part of this winter's Warm Home Discount scheme, which gives eligible households £150 off their electricity bill. If you switched to Fuse after 13 August 2023, and are eligible for the rebate, the £150 will be credited to your electricity account by 31 March 2024. If you switched to Fuse on or before 13 August 2023, you won't be able to get the £150 rebate, even if eligible. We're checking with the Government if there's anything that can be done about this and we'll update this story when we know more.

• Fuse's tariff is variable. This means the price can go up and down in line with the Price Cap (but can't exceed it). Fuse also gives every customer £5 bill credit on their birthday each year.

• The firm claims to be renewable. It says it owns and operates two solar farms in the south of England and a wind farm in Scotland, though generally energy generation and supply aren't directly linked – see our Green energy guide for full info.

• As it's new, we've no feedback on its customer service or general performance. So we've no record of how it will operate, or how you'll be treated if you have a problem. However, Fuse told us its average customer response time is two minutes, but as the firm has a very small user base at present, this response time could rise if it takes on more customers.

• We suspect if many of you try to switch to it, it may struggle to cope. It's a small, new firm with only about 6,000 sign-ups to date. If everyone reading about Fuse on MoneySavingExpert.com went to get it, it may struggle – even major firms sometimes aren't able to cope with that level of demand. So be aware that this could be a problem. 

• Fuse Energy has been co-founded by former executives of the banking app Revolut. The firm, which officially launched on 19 July 2023, has also appointed Dermot Nolan – a former Ofgem chief executive – as an adviser and it has financial backing from ex-Formula 1 driver Nico Rosberg.

• Yet it's unclear how robust Fuse is financially. Over 20 energy firms have gone bust in the last couple of years due to the energy crisis, with many customers moved to new suppliers and put on new tariffs (you won't lose your credit in this scenario and you will, at the very least, be moved to a tariff on the Price Cap).

  We asked Fuse what it would say to customers worried about energy firms going bust and wondering about its financial strength. A spokesperson told us: "Energy firms typically go bust when they are not financially resilient or do not hedge well. I would point towards our funding – $78 million is the largest venture capital seed round [of funding from investors] in the UK to date and so we are very comfortable on that front."

  It is worth noting that while energy regulator Ofgem has brought in more stringent initial checks for new firms, Fuse hasn't undergone these as it took over a different firm's (Paddington Power's) electricity supply licence, which means it wasn't required to pass some of the regulator's checks before launching.

  It will, however, still undergo various checks as it takes on more customers, including to ensure its customer service, billing and IT systems, among other things, are up to scratch – but we have no way of knowing in advance what issues these checks may bring up (if any).

Overall, is Fuse worth it?

On the surface, Fuse is a no-brainer compared with sticking on the Price Cap. The worst that can happen from a cost perspective is that the tariff increases to the same level as the Price Cap, which is no worse than being on any other price-capped tariff at present.

There are also no early exit fees on this tariff, meaning you can switch elsewhere at any time penalty-free.

You do, however, need to consider the fact that it's electricity-only and a new company, which isn't tried and tested, and we don't know how well it will cope with demand.

Alternatives to Fuse – what to do with your energy tariff

Before switching to Fuse, you should also consider the alternatives...

1. 'Do nothing' – stick on the Price Cap. The vast majority of homes are on standard variable tariffs set at the maximum level they can be under Ofgem's Price Cap. This cap moves every three months, and on Saturday 1 July dropped an average 17% and is set to drop by a further 7% on Sunday 1 October. The cap varies by region and is a limit on the standing charge and unit rates – see the actual Price Cap rates. So this is the benchmark to judge everything else on.

   Analysts at Cornwall Insight believe the average price paid over the next year will be roughly 5% lower than the current rates (more in Price Cap predictions). Yet there's no guarantee it'll go that way – things could change radically.

2. 'Get a fixed tariff' – lock in the rate if you want price certainty. With a fix, the rates you pay are locked in for the duration of your deal giving you certainty, but if you want to leave early, you'll usually have to pay an exit fee. Whether it's right for you depends on how much you value price certainty. The good news is there are fixed deals available that are below the current Price Cap rates. More info is in our Should I fix? guide.

3. 'Cheaper variable deals' – these undercut the Price Cap. We've already outlined Fuse, but there are others, including the Octopus Tracker tariff. This is available for existing Octopus customers (though others can just switch first to its standard tariff, then to this) and its price changes daily based on wholesale rates. So this is more of a gamble, but over recent months it would've paid off compared with the Price Cap.

   And if it started to get expensive, you could just switch back to its price-capped standard tariff. You can see what other cheap variable tariffs are available in our new guide Stick, switch or fix your energy tariff – what are your options?

4. 'Time-of-use tariffs' – good for those who can control peak usage, for example, electric vehicle owners. Currently, we know of five energy suppliers offering innovative EV/time-of-use tariffs: British Gas, E.on, EDF, Octopus and Ovo. These tariffs are where you get a few hours of cheap rates (7.5p to 10p a kilowatt hour), plus there's Octopus Agile, where prices change every half hour depending on nationwide demand.