- Fixed price deals could save consumers up to £250 a year compared to variable tariffs
- Fixed tariffs currently offer lower rates, plus the added benefit of helping with budgeting
- Ofgem rules ensure consumers can trust fixed price deals and they will be protected when these deals come to an end
Recent research from Ofgem has shown that the gap between average variable tariffs and the cheapest fixed tariffs is so wide most consumers would be better off on a fixed deal. Despite the recent cuts to variable prices, the potential saving of up to £250 means that most consumers would be better off moving to a fixed deal.
Ofgem’s research also found that some of the cheapest fixed tariffs were with independent suppliers with some fixed deals at around £915 per year, compared to £1,1651 for the average variable tariff with one of the larger suppliers. Around half of customers switching supplier now move to independent suppliers.
Ofgem CEO Dermot Nolan said: “While recent price cuts are a step in the right direction, many customers could be better off to the tune of up to £250 by moving from a variable rate to a fixed rate deal. If you’re not sure where to start, then I’d strongly recommend the Be An Energy Shopper website for an independent and impartial guide.
“We are seeing companies compete for consumers interested in taking a fixed price deal. However, we are not seeing rigorous competition between suppliers that benefits all consumers. Around 60 per cent of customers are on variable tariffs, and the lack of competitive pressure on prices for these customers is another reason why the Competition and Markets Authority is investigating this market. In the meantime, I would like as many consumers as possible to look for a better deal, as it’s never been easier to shop around for their energy.”
Customers can confidently choose to move to a fixed price deal, thanks to protections Ofgem made in 2013:
- Fixed means fixed. Suppliers cannot increase prices mid-way through a contract.
- At the end of a fixed deal, suppliers must give customers advanced warning and all the information they need to find another cheap fixed price deal.
- If the customer hasn’t found a new deal to switch to, they are automatically put onto the suppliers’ cheapest variable tariff. Suppliers won’t be able to charge any fees when they next switch.
Some fixed tariffs now offer low or no exit fees. Look for these, so if prices drop significantly you can still easily switch to a better deal.
Notes to Editors
1. See our infographic on how the fixed tariff savings add up:
2. Variable tariffs:
Variable tariffs have no set end date and the prices are not fixed, so suppliers can change them as long as they give customers advance notice. These tariffs can’t have any exit fees, so customers are free to switch away if they want.
All energy suppliers must have at least one variable tariff. Customers are automatically put on to their suppliers’ cheapest variable tariff when their fixed deal comes to an end, if they have not opted to switch to another tariff.
All calculations are based on a GB average and assume typical domestic consumption of 13,500kWh gas and 3,200kWh electricity per year. The switching saving is calculated as the difference between an average variable tariff from the larger suppliers (on direct debit) and the cheapest fixed tariffs in the market (also on direct debit). Data is as of the 28th of each month except for January 2015 which is as of 20 January 2015 (which includes price announcements from British Gas, E.ON, Scottish Power and npower).
4. About Ofgem's Be An Energy Shopper campaign
The Be An Energy Shopper campaign was launched by Ofgem in response to consumer demand for impartial advice on how to compare tariffs in the gas and electricity markets. There’s an easy guide on the go energy shopping website that shows how recent changes to the energy market can help consumers to compare tariffs and get a better deal on their gas and electricity bills.
The website includes:
- New tools to help people compare the different tariffs
- A glossary explaining the language used on bills
- Links to other useful sites, including comparison services accredited to Ofgem’s Confidence Code
- A step-by-step guide that visitors can download and keep, or to give to friends and relatives without internet access.
5. Faster switching
Now that switching times have reduced to 17 days, there is even more incentive for consumers to review their gas and electricity bills as they can make savings during the final winter months, when energy consumption is typically higher.
6. Getting advice by phone
If you are seeking information, support or funding for making energy efficiency improvements to your home please contact Simple Energy Advice or on 0800 444202. Callers from Scotland please call Home Energy Scotland on 0808 808 2282.
For free, independent advice about energy, people can call the Citizens Advice consumer helpline on 0845 04 05 06.
For further information, please contact:
Kate Wilcox 020 7901 7113
Chris Lock 020 7901 7225
Out of hours media contact number 07766 511470
For further information on Be An Energy Shopper, please contact:
Eleanor de Kanter 020 3263 9727
1 Average annual energy bill for a customer on a standard variable tariff with one of the larger suppliers, paying by Direct Debit