Should I fix my energy prices?

As energy prices gradually decrease, households and businesses across Britain are considering whether to fix their energy prices.

In this guide, we’ll provide the latest information to help you make this decision.

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Are energy prices going down?

Fixing energy prices locks in the current market rates, protecting you against future price rises. However, if prices fall, it might be better to stick with variable rates.

That’s why our customers are asking: Are energy prices going down? Here’s what we know.

The energy price cap will decrease by 7% from the 1st of July, reflecting an expected fall in energy prices during the summer months, when demand for energy across the UK and Europe decreases.

Looking ahead to the winter, market analysts expect prices to trend upward again. Current forecasts predict a 12% increase in the price cap on the 1st of October, then stabilising into 2025.

💡 It’s important to note that homes and businesses consume the most energy during the winter months, exposing them to the expected increase in energy prices this winter.

Energy price cap forecast

Below are the current price caps for the average home, the upcoming announced price cap from July 1st, and forecasted rates.

Read on for more information below about the energy price cap.

  • April to June 2024: £1,690 (current price cap)
  • July to September 2024: £1,568 (announced price cap)
  • October to December 2024: £1,761 (Cornwall Insights forecast)

Predicting energy prices is difficult

The energy price forecasts quoted above are based on the best estimates from industry analysts.

However, it’s important to recognise the inherent uncertainty in these forecasts. Changes in the wars in Ukraine and Gaza, or even this winter’s weather, can drastically affect energy prices.

Fixing energy prices will protect you from any price rises due to unexpected geopolitical events.

Why are energy prices so high?

Energy prices remain approximately double the historical average of the past decade and are expected to stay elevated for the foreseeable future.

Electricity and gas prices continue to feel the impact of geopolitics, notably the conflict in Ukraine, which has caused a significant scarcity of natural gas on the European continent, thus raising the wholesale cost of gas.

In Great Britain, both the electricity and gas networks rely on gas imports to meet demand, meaning that our energy price also remains high.

Should I fix my energy prices?

Fixing energy prices at the right time allows you to benefit from cheaper prices offered by suppliers looking to attract new customers. It also locks in those rates, protecting you against future price volatility.

But for both homes and businesses, people are asking – is now the right time to fix energy prices?

The answer depends on whether you need energy for your home or business. Continue reading for our detailed answer to both.

Home energy

On 1 April 2024, customers on standard variable tariffs benefited from a 12% fall in energy prices thanks to a change in the price cap.

From 1 July 2024 the energy price cap will fall a further 7%. Market analysts predict that the price cap will rise slightly in the fourth quarter of the year.

We recommend fixing your home energy prices if you find a deal significantly cheaper than the current price cap.

Use our energy comparison tool to compare the cost of your current tariff to fixed deals available in the market.

Business energy

Businesses do not benefit from a price cap, which means out-of-contract tariffs tend to be uncompetitive and needlessly expensive.

All government support for the energy crisis ended on 1 April 2024. We, therefore, recommend reviewing your current arrangements to see how much you could save with a fixed business energy tariff.

Compare the latest business electricity prices and commercial gas rates to make an informed decision.

Use our business energy comparison service to get the best prices offered by our panel of energy suppliers.

Why should I fix my energy prices in 2024?

As we’ve discussed above, fixing your energy prices provides:

  • Peace of mind
  • Protects against volatile energy prices
  • Lets you plan your energy spending for the next 12 months

However, there is another key reason why most people choose fixed contracts: Energy suppliers offer their best deals as fixed contracts to attract new customers.

With a fixed deal, an energy supplier secures a new customer for at least a year, which is great for growing their business. Suppliers compete to offer the lowest fixed energy prices to attract the most new customers.

Find out how much you could save today by fixing energy prices.

Should I renew my business energy contract now?

Business energy suppliers want to retain their customers and typically offer a fixed rate renewal quote to customers approaching the end of their business energy contract.

We recommend not blindly accepting the renewal rates offered by your supplier but instead comparing them to those offered by alternative suppliers. Using our business gas comparison and business electricity comparison services, you can assess whether your renewal quote is a fair offer.

What is the energy price cap?

The energy price cap limits how much suppliers can charge for electricity and gas under a standard variable tariff. It acts as a maximum price limit for energy suppliers.

The current price cap is £1,690 for the average UK home until 30 June 2024. The price cap is set to reduce to £1,568 from 1 July to 30 September 2024.

💡Unlike domestic consumers, there is no business energy price cap, which means that variable business energy contracts can be needlessly expensive.

Who is protected by the energy price cap?

The energy price cap applies to domestic standard variable (default) tariffs.

The energy price cap applies to all payment arrangements:

  • Standard credit (you pay manually when you receive a bill)
  • Direct Debit (payment is collected automatically)
  • Prepayment meter (you pay in advance)

The energy price cap applies to variable tariffs on single-rate energy meters and dual-rate economy 7 meters.

What is the current energy price cap?

On 23 February 2024, Ofgem announced that the energy price cap from 1 April 2024 to 30 June 2024 would be set at £1,690 annually for customers on a default tariff.

The typical energy unit prices during this period are as follows:

  • Electricity: 24.5p per kWh with a daily standing charge of 60p.
  • Gas: 6p per kWh with a daily standing charge of 31p.

Source: Ofgem

Note that the exact price cap rates depend on your home’s (1) location and (2) payment method. Enter these into our finder below to find the exact price cap rates that apply to you

Energy Price Cap Finder (1 April to 30 June 2024)

How is the energy price cap calculated?

Ofgem sets the energy price cap at a rate that allows suppliers to compete effectively and encourages customers to compare energy suppliers and switch to the most competitive tariffs.

The energy price cap is calculated based on the underlying cost of supplying electricity or gas, plus an allowance for the profit of energy suppliers.

Here’s a breakdown of the separate costs incurred by energy suppliers that are included within the price cap:

  • Wholesale energy – The price the supplier pays for the electricity and gas based upon forward rates available on the market. Check out our guide to the latest wholesale energy prices.
  • Network costs – The cost of moving energy through the national grid, local electricity distribution network and local gas distribution networks to deliver to individual household customers.
  • Policy costs – The cost of the government’s social and environmental policies, including the emissions trading scheme.
  • Operating costs – The cost of being an energy supplier, including providing energy meters, a customer services department and producing energy bills.
  • Payment collection costs – The cost of collecting money from customers. The allowance is slightly different depending on whether you pay by direct debit, BACS or prepayment.
  • VAT – An additional 5% consumer tax levied on all household bills.