The energy price cap is scheduled to increase on July 1, with the average household facing an annual cost of £1,862, a rise of £221 from the previous rate. This adjustment means an increase of approximately £18.40 per month for households not currently on a fixed tariff.
Despite the upcoming increase, there is potential for consumers to mitigate these rising costs. Independent energy analyst Cornwall Insight has predicted that the price cap may see a slight decrease to £1,849 from October. This forecast is attributed to easing tensions in the Middle East, which have contributed to stabilizing wholesale energy markets. However, the firm cautions that prices are likely to remain elevated due to ongoing uncertainties regarding peace talks, the status of the Strait of Hormuz, and the timeline for repairing damaged infrastructure.
For consumers on variable tariffs, fixing their energy rate presents an opportunity to avoid the higher costs associated with the price cap. Fixed tariff deals, available for periods of 12 months or longer, can offer greater certainty over monthly bills. In recent weeks, fixed deals have been observed priced below both the current and the projected October price cap.
Smaller energy suppliers often offer the most competitive fixed tariffs. Uswitch, a comparison website, regularly highlights deals from suppliers such as Outfox Energy and Fuse Energy. As of recently, Outfox Energy was offering a 12-month or two-year fix for an estimated £1,577 annually for an average household paying by direct debit, with exit fees of £75 per fuel for the 12-month plan and £100 per fuel for the two-year plan.
Among more recognizable suppliers, Eon Next has offered a fixed deal at approximately £1,705 for the average household on both 12-month and two-year plans. Exit fees for this Eon Next deal are £50 per fuel for the 12-month contract and £100 per fuel for the two-year contract. When evaluating fixed tariffs, it is crucial to consider exit fees, which are charges incurred if a customer switches to a different provider before the contract term concludes.
It is important to note that the quoted annual bill figures for the price cap and fixed tariffs are estimates based on average household consumption. Ofgem, the energy regulator, defines an average household as a three-bedroom property occupied by two to three people. The actual amount paid by a household depends on its energy usage; consuming more energy than the average will result in higher bills. Ofgem is also updating its typical energy usage figures, effective July 1, to reflect a reduction in household energy consumption. This update will lead to lower listed annual costs under the price cap and fixed deals. For instance, the July price cap of £1,862 under old figures will be £1,663 under the new ones. Similarly, the October forecast of £1,849 is expected to be around £1,654 under the revised usage figures. These adjustments in how average usage is calculated do not indicate a decrease in the underlying cost of energy, which continues to rise.