Like many people I am staring down the barrel of my energy bills soaring and trying to work out what to do.
Is it better to just opt for the energy price cap, or with scary forecasts of that rising almost another 50 per cent do I try to fix?
And if I wanted to fix are there even any meaningful options, or just over-priced traps to fall into?
Double whammy: The end of his Octopus fixed rate deal will see Simon Lambert’s bills jump, then a fortnight later the energy price cap rise will send them up another 54%
I’m in the unfortunate position of facing a double whammy: my fixed energy deal ends next week and then the energy price cap goes up on 1 April.
So, I’ll move to a default energy price cap rate that’s significantly more expensive than my fix for a fortnight and then see the cap and my bills rocket 54 per cent.
The combined effect will see my gas and electricity bills double in less than a month.
I wrote about this at the start of February, but a couple of things have changed since then: we now know the new energy price cap figure and Russia’s invasion of Ukraine has sent forecasts for energy prices soaring even higher.
Ofgem announced the price cap for an average household will rise from £1,277 to £1,971 from 1 April to the end of September.
In early February, there was a widespread expectation that it would go up again from 1 October but some hope that energy price rises may slow or even dissipate.
The Russia-Ukraine crisis and sanctions have put paid to that. Analysts at Cornwall Insight now predict another 47 per cent rise in the price cap from October. This would take the energy price cap to £2,900.
Others put even higher forecasts on what the price cap could reach, but in all reality it’s almost impossible to predict, as there is mayhem in fuel and commodity markets at the moment.
A further issue is that the quoted price cap is for the average household and all our bills differ.
A conversation among friends the other day put the range of monthly bills between £50 and £250. Suffice it to say, most were amazed by the energy usage of those at either end of the spectrum.
My bills currently average about £150 a month on my fixed rate deal that’s about to run out.
For a fortnight they will rise to £200 and then the new price cap kicks in and they will hit about £300 per month, or £3,600 per year.
So, what am I going to do?
This is the best fixed rate energy deal that Octopus offered me as a loyal customer on 27 January – equating to £4,400 a year
Octopus wrote to me in late January offering three options: a shift to its Flexible Octopus energy price cap variable rate (roughly £3,600 per year); a 12 month fixed rate estimated at £4,970 per year; or a Loyal Octopus 12 month fixed rate at about £4,400 per year.
These are based on my estimated usage, the actual cost will change depending on how much energy we actually use – and I am on a smart meter so that is accurate from month to month.
The fixes from mid-March would kick in roughly in line with the price cap rise from 1 April, but I will only get six months of price cap protection and then it’s forecast to rise again.
In late January, the October price cap forecast was considerably lower than now, so fixing didn’t look attractive.
But now things have changed and it’s expected to go up by much more.
Here’s how the numbers work:
Let’s say I pay £1,800 for that six months, and then from 1 October the price cap goes up 47 per cent and I pay £2,646 for the next six months.
This totals £4,446 a year.
All of a sudden, the 12 month fixed rate at £4,400 a year starts to look attractive.
There’s one small problem though. Octopus didn’t say their offer was time limited, but when I checked yesterday, my 12 month fixed rate offers have lost two months and rocketed in price.
Octopus now offers me a standard 10 month fixed deal at £487 per month or £5,844 per year, or a Loyal Octopus 10 month fix at £470 per month or £5,640 per year.
On clicking through from the email offering fixed deals at the end of January, I discovered they were no longer there and Octopus now offered a pair of 10 month deals at higher prices
The best of the two 10 month deals that I am being offered now equates to £5,641 per year
The old advice would have been to switch, but energy switching is all but pointless for most now.
This is Money’s energy comparison partner Compare the Market shows a mere nine deals I could opt for: ranging from Good Energy’s £519 per month or £6,229 per year fix until September 2023, to Sainsbury’s Energy’s 1 year Fix and Reward at £762.50 per month or £9,150 per year.
(Better hope that Sainsbury’s deal comes with a seriously big reward to make up for the bills.)
So, I’m back to the point where moving onto my supplier’s energy price cap default tariff Flexible Octopus looks by far the best option.
This seems to be the case for most others too, although do your own research and check all the options your supplier can give you. A few cheeky low fixed rates may slip out and get snapped up, as happened with E.ON recently.
And if you don’t have smart meter, make sure you take regular meter readings, and definitely get one on 31 March – ideally with photos of the meter.
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