Households are being advised to secure fixed-rate energy deals to protect themselves from potential bill increases, as escalating conflict between the US and Iran drives up wholesale energy prices. Wholesale prices for natural gas and heating oil have reportedly risen by 15% in the past week, a cost that energy suppliers typically pass on to consumers.
EDF has cautioned that the Ofgem price cap, which regulates energy bills for customers not on fixed contracts, may increase more than previously anticipated in October. Cornwall Insight currently forecasts a slight decrease in the cap from £1,862 to £1,849 annually for an average household. However, fixing a tariff for a year or more now could allow consumers to lock in a rate lower than the projected future price cap.
Cheapest Fixed Energy Deals
Comparison website Uswitch identifies a 15-month fixed deal from Outfox Energy at £1,424 as the cheapest available option. This price is £239 below the current price cap, based on typical household energy usage. The second cheapest is a 15-month deal from Fuse Energy at £1,453, which is £210 below the current cap. Outfox Energy also offers a 13-month deal at £1,471, £192 lower than the price cap.
Consumers are reminded that exit fees may apply if a fixed deal is terminated early. Ben Gallizzi, an energy expert at Uswitch, advised consumers not to delay in securing a fixed deal. "With wholesale markets swinging on the back of the conflict in the Middle East, suppliers are already recalculating what October could look like – and the early signs point to another increase," Gallizzi stated. He added, "If you're still on a standard variable tariff, you're exposed to a market that's currently moving in the wrong direction."
Ofgem adjusts the energy price cap every three months to reflect global wholesale energy costs. The cap increased by 13% on July 1 to £1,862 annually for an average household in England, Scotland, and Wales paying by direct debit. Households on standard variable tariffs may already be paying more than necessary, according to Uswitch. Switching to a fixed-rate deal offers protection against future price cap changes. While a decrease in the October price cap is possible if the Middle East situation de-escalates, a significant fall is considered unlikely. The figure for the October price cap is scheduled to be announced on August 26.