Households choosing to sign up to any of the fixed energy tariffs currently available, could end up paying around £130 more on average than the projected April Default Tariff Cap (price cap), according to Cornwall Insight’s Domestic Tariff Report.
Our latest price cap forecasts1 show the cap dropping by 16% in April, bringing dual-fuel bills for typical consumers2 down to £1,620. By comparison the cheapest fixed rate tariff currently available to all customers is £1,753 p/a, £133 above the anticipated cap.
Fixed tariffs offer the benefit of locked-in energy rates, usually for a year or more, but if variable energy prices come down, and customers want to switch before the end of their contract, they could incur a large exit fee. There are currently 35 fixed rate tariffs available in the market.
While the April cap level could still shift before February’s official announcement, Ofgem is already two-thirds of the way through the “observation window” used to calculate the cap’s wholesale element, meaning substantial change is unlikely. Prices are forecast to remain lower than current prices throughout 2024.
Figure 1: Fixed tariffs in the market at 27 January (excluding regional tariffs)
|Available to new and existing customers
|Available to existing customers only
|Total number in the market
Source: Cornwall Insight Domestic Tariff Report
The lack of lower priced fixed rate energy deals in the market has been partly attributed to the Market Stabilisation Charge (MSC) which requires all domestic suppliers acquiring a customer to make a payment to the supplier that is losing the customer. This comes to an end on 31 March, and it is hoped more fixed price deals will be introduced following the end of the policy.
Suppliers’ hands are also tied by the ban on acquisition tariffs (BAT), preventing them from enticing new customers with cheaper deals than those on offer to existing customers. Discussions on the future of BAT are ongoing.
James Mabey, Analyst at Cornwall Insight:
“After a slow comeback, fixed energy deals have started to attract more customers, with the guaranteed rates proving increasingly appealing to those seeking to protect themselves from further economic instability.
“With some fixed energy tariffs dipping below the existing price cap, it’s understandably tempting to sign up. However, there is a risk these deals might not translate to actual savings come April, when a significant decrease in the price cap is projected. It is important consumers weigh the immediate appeal of a slightly lower price against the potential for larger savings down the line.
“It is hoped that the end of the Market Stabilisation Charge will be a turning-point for fixed energy deals. With this burden lifted, suppliers will have greater flexibility to offer competitive fixed price tariffs, providing much-needed stability and peace of mind for struggling households.”
- Cornwall Insight’s current forecasts for the Default Tariff Cap: Predictions and Insights into the Default Tariff Cap
- All pricing figures and cap forecasts are using Ofgem’s current Typical Domestic Consumption Values (TDCVs). For our latest price cap forecasts using the new TDCVs, effective from 1 October 2023, click HERE.
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