The energy price cap in the UK is set to rise from July 1, with average household annual bills increasing to £1,862. This change means an additional £18.40 per month for households on variable tariffs. However, independent energy analyst Cornwall Insight forecasts a slight decrease in the price cap to approximately £1,849 starting in October.
This projected dip is attributed to stabilizing wholesale energy markets, influenced by easing tensions in the Middle East. Despite this, Cornwall Insight notes that prices are expected to remain elevated due to ongoing uncertainties surrounding peace talks, the potential reopening of the Strait of Hormuz, and the timeline for repairing damaged infrastructure.
For consumers looking to avoid the impact of rising variable tariffs, fixing energy rates presents an option for greater bill certainty. Fixed-term contracts, available for durations such as 12 months or longer, can offer protection against future price increases. Recent market analysis indicates that fixed deals have been available at rates lower than both the confirmed July cap and the predicted October cap.
Smaller energy suppliers often provide the most competitive fixed tariffs. Uswitch, a comparison website, regularly identifies Outfox Energy and Fuse Energy as offering some of the lowest rates. As of a recent assessment, Outfox Energy was offering a 12-month and a two-year fix for an estimated £1,577 annually for typical households paying by direct debit. These deals come with exit fees of £75 for a 12-month contract and £100 per fuel for a two-year contract.
Among more recognized energy providers, Eon Next was offering a fixed deal priced at approximately £1,705 for the average household on both 12-month and two-year contracts. Exit fees for Eon Next's deals were £50 per fuel for a 12-month contract and £100 per fuel for a two-year contract. When comparing fixed tariffs, it is important to consider exit fees, which are penalties for switching to a different provider before the contract ends.
The quoted annual bill figures for both the price cap and fixed tariffs are estimates based on average household energy consumption. Ofgem, the energy regulator, defines an average household as a three-bedroom property with two to three occupants. The actual amount a household pays depends on its energy usage, as the cap or fixed deal sets the maximum price per unit of energy.
Ofgem is also updating its typical energy usage figures from July 1, which will reflect decreased household energy consumption. This adjustment is expected to lower the listed annual costs under the price cap and fixed deals. For instance, the July price cap, previously £1,862 under older figures, is projected to be £1,663 under the new figures. Similarly, the October forecast from Cornwall Insight is expected to be around £1,654 under the updated consumption data, indicating little change from the July figures when adjusted. These adjustments in calculation do not signify a reduction in the actual cost of energy, which continues to trend upwards.