Should I fix my energy prices?

Deciding whether to fix your energy prices is a common dilemma for UK households, especially with market fluctuations. The choice between a fixed and variable tariff hinges on your personal circumstances, appetite for risk, and understanding of the energy market. This guide will help you weigh the options and make an informed decision that brings greater financial stability and peace of mind.

Understanding your energy usage and tariff options is key to managing your household budget effectively. Fuse Energy offers clear visibility of your energy consumption through its app, helping you make informed decisions about your tariff. Click here to see how Fuse can help you take control of your energy.

Fixed vs variable energy tariffs explained

Understanding the fundamental differences between fixed and variable energy tariffs is the first step in making an informed choice for your home.

What is a fixed tariff?

A fixed tariff locks in the unit rate you pay for your electricity and gas for a set period, usually between 12 and 18 months. This means the price you pay per kilowatt-hour (kWh) for the energy you use, and often the daily standing charge, will not change during your contract term. This offers predictability for your energy costs, making budgeting simpler.

What is a variable tariff?

In contrast, a variable tariff means the unit rates and standing charges you pay can change quarterly. These tariffs usually track wholesale energy prices, which can rise or fall depending on market conditions. While they offer flexibility, they also come with the risk of price increases. Most households on standard variable tariffs are protected by the energy price cap.

The energy price cap and your bill

The energy price cap, set by the regulator Ofgem, limits the maximum unit rates and standing charges suppliers can charge for variable tariffs, as well as for fixed tariffs that are ending or deemed tariffs. It's important to remember that the cap limits the unit rate, not your total bill. Your overall cost still depends on how much energy you use. Ofgem reviews and updates the price cap quarterly, with changes typically taking effect on 1 January, 1 April, 1 July, and 1 October. For the period of 1 July to 30 September 2026, the electricity unit rate under the price cap is 26.11p per kWh, and the gas unit rate is 7.33p per kWh.

The benefits and drawbacks of fixing your energy price

Fixing your energy prices can offer stability, but it's not without its potential downsides. Weighing these carefully is crucial.

Advantages of a fixed tariff

The primary advantage of a fixed tariff is price certainty. You'll know exactly what you're paying per unit of energy for the duration of your contract, which makes budgeting much easier. This can shield you from unexpected price hikes if wholesale energy costs suddenly increase. For many, this predictability offers significant peace of mind, especially in volatile markets.

Disadvantages of a fixed tariff

The main drawback is that if wholesale energy prices fall significantly, you could end up paying more than those on a variable tariff. You might miss out on cheaper deals that become available later. Fixed tariffs usually last between 12 and 18 months, so you're committed for that period.

Understanding exit fees

Most fixed tariffs include exit fees, which you'll have to pay if you switch to another supplier or tariff before your contract ends. These fees are tariff-specific and can vary, with £50 being a common illustrative figure. Always check the exit fees before committing to a fixed tariff, as they can significantly impact the financial benefit of switching.

Key factors to consider before you fix

Making the right decision involves looking closely at your own energy habits and financial situation.

Your household's energy usage

Understanding how much energy your household uses is fundamental. According to Ofgem, the average UK home uses around 2,500 kWh of electricity and 9,500 kWh of gas per year. Knowing your typical consumption helps you compare the total cost of different tariffs more accurately. Fuse's app provides clear visibility of your energy usage, empowering you to understand your consumption before deciding on a tariff. This insight ensures you pick a tariff that truly suits your needs, not just one that looks good on paper. For those considering how to reduce their energy consumption, understanding how different heating systems work, such as an air source heat pump, can be beneficial.

Current market forecasts

Keep an eye on energy market forecasts and predictions. While no one can guarantee future price movements, industry experts and Ofgem's announcements can offer insights into potential trends. If prices are expected to rise, a fixed tariff might be appealing. If they are predicted to fall, a variable tariff could offer better value.

Your financial risk tolerance

Consider your comfort level with financial risk. If you prefer stable, predictable outgoings and want to avoid the stress of fluctuating bills, a fixed tariff might be a good fit. If you're comfortable with some uncertainty and are prepared to switch if prices drop, a variable tariff could work. This decision is about more than just cost; it's about what helps you manage your household budget with confidence.

The length of the fixed term

Fixed tariffs usually last between 12 and 18 months. A longer fixed term offers extended price certainty but also means you're locked in for longer. A shorter term provides less certainty but more flexibility to switch sooner if market conditions change.

Navigating the current energy market

The energy market is constantly evolving, making it essential to stay informed about the latest developments.

Recent price cap changes

Ofgem's energy price cap is a key indicator of market conditions, as it reflects wholesale costs. The cap is reviewed quarterly, and its changes impact millions of households on variable tariffs. Monitoring these announcements can provide valuable context for your decision.

Wholesale market trends

Wholesale energy prices are influenced by global events, supply and demand, and geopolitical factors. These trends directly affect the prices suppliers offer for both fixed and variable tariffs. While it's impossible to predict every shift, understanding the general direction of wholesale prices can help you anticipate future tariff changes.

What if prices fall?

One of the biggest concerns with a fixed tariff is what happens if energy prices fall after you've locked in. If this occurs, you'll continue to pay your agreed-upon fixed rate, which could be higher than the new variable rates available. This is where exit fees become relevant; you might have to pay a fee to leave your fixed contract early to switch to a cheaper deal. It's a trade-off between guaranteed stability and the potential for lower costs.

Making the right decision for your home

Ultimately, the best decision for your energy prices is a personal one, tailored to your household's needs.

Comparing available deals

Always compare the available fixed and variable tariff options from different suppliers. Look beyond just the unit rates; consider standing charges, contract length, and any exit fees. Online comparison tools can help you see a range of options side-by-side.

Reviewing your personal circumstances

Your energy usage patterns, financial situation, and how much you value price predictability should guide your choice. If you use a lot of energy, especially during peak times, a fixed tariff might offer more protection. If you have a tight budget, the certainty of fixed payments can be invaluable. Fuse encourages proactive energy management, framing the decision to fix prices as a step towards greater financial stability and peace of mind, not just a reaction to scarcity.

Seeking further support

If you're still unsure, don't hesitate to seek further advice. Organisations like Citizens Advice offer impartial guidance on energy tariffs and consumer rights. Fuse also offers 24/7 human customer support to help customers navigate complex tariff decisions and understand their options, ensuring you have the information you need to make the best choice for your home.

Managing your energy bills should be clear and easy to understand. Fuse Energy focuses on straightforward pricing, so you can see exactly what you're paying without unnecessary complexity. If you have a smart meter, you can view detailed usage data through the app or website, helping you understand how you can lower your bills. Our 24/7 human support team is always on hand with fast response times whenever you need help. Click here to switch to Fuse Energy today. Find out about our mission by clicking here.