Households are STILL lacking out on low-cost mounted power offers

The variety of fixed-rate power offers available on the market remains to be low – and most work out as the costliest option to energy a house.

UK households are at present paying typical power payments of £1,928 a yr – the common quantity paid for fuel and electrical energy for a variable-rate deal restricted by the Ofgem worth cap. 

The solely hope of paying lower than that’s discovering a less expensive fixed-rate deal, which had been as soon as the most typical sort of power tariff however have now nearly dried up.

Although fixed-rate power offers are coming again, the newest figures from Ofgem and Cornwall Insight present that these tariffs stay scarce – and costly.

Figures on the variety of fixed-rate offers are exhausting to return by.

But power analysts at Cornwall Insight instructed This is Money there are at present simply 27 such offers obtainable for brand spanking new and current prospects, with an extra 5 for current prospects solely – a complete of 32.

That is a small rise on the 28 fixes obtainable in December 2023 (5 for current prospects) and 26 in November 2023 (six for current prospects).

Most fixed-rate power tariffs are additionally nonetheless costly, providing little incentive for patrons to depart variable-rate offers. 

Ofgem mentioned the common mounted price power deal value precisely £100 a yr greater than a price-capped tariff in November 2023, in keeping with its newest figures.

However, some power fixes are cheaper than price-capped ones.

The most cost-effective fixed-rate tariff available on the market now with no strings hooked up prices £1,804 a yr, from Home Energy.

That is £104 a yr cheaper than a price-capped deal, for common power use. 

The absolute most cost-effective repair is £1,757 a yr, from Ovo, £171 a yr cheaper than a price-capped tariff. However, this deal additionally requires prospects to take out boiler cowl by the power agency.

Richard Neudegg, director of regulation at Uswitch, mentioned: ‘There are extra mounted offers obtainable now, than this time final yr when there have been barely any. Yet there’s nonetheless considerably lower than earlier than the power disaster, when the power companies would usually provide a number of mounted choices.

‘Some mounted offers are solely obtainable to current prospects however there are some open to new prospects, which provides households on the lookout for worth certainty some alternative over their power tariff. More nonetheless must be completed to encourage suppliers to carry engaging offers to the market.’

How can I inform if a hard and fast will save me cash?

To work out if an power deal – mounted or in any other case – is cheaper than you’re paying now, examine the unit price and standing cost with what you at present pay.

The common house is paying charges restricted by the Ofgem worth cap, which suggests 53p a day in electrical energy standing costs and 30p for fuel, whereas electrical energy unit charges are 29p per kilowatt-hour (kWh) and 7p/kWh for fuel.

The huge variable is what occurs with the Ofgem worth cap sooner or later. It is likely to be attainable to lock into a less expensive deal now, solely to see the value cap fall considerably, leaving you overpaying.

When will cheaper power offers come again? 

It is unlikely that many extra mounted charges will launch within the close to future, or that they are going to be that low-cost.

Cornwall Insight analyst James Mabey mentioned: ‘We don’t anticipate there to be a considerable rise in mounted tariffs over the subsequent few months.

‘Despite wholesale costs easing comparatively by the latter a part of 2023, the Market Stabilisation Charge (MSC) remains to be in play, and has risen steadily since December, that means there stays a monetary threat for suppliers to supply mounted tariffs which might be at a worth place prone to considerably flip the dial.’

The MSC means no power agency is prone to carry out fixed-rate offers that critically undercut their rivals, as this might imply they achieve prospects however threat dropping cash by having to compensate their opponents if wholesale costs fall.

As the title suggests, the purpose of the MSC is that it stabilises the market by stopping one power agency popping out with very low-cost deal and inflicting the others to fail.

The MSC ends on 31 March 2024.

Another Ofgem coverage that’s holding again the launch of extra mounted charges is the ban on acquisition-only tariffs (BAT), Mabey added.

This is an Ofgem coverage which stops power companies providing cheaper offers to new prospects, until they provide these costs to their present prospects as nicely.

Like the MSC, Ofgem introduced this coverage in in April 2022 to cease one power agency drastically undercutting its rivals at a time of nice turmoil for power companies.

Mabey mentioned: ‘Ofgem has confirmed that the MSC will expire on 31 March, whereas the way forward for the BAT stays unclear, with the regulator contemplating whether or not to increase the measure previous 31 March.’

Neudegg added: ‘The power worth cap for normal plans is predicted to fall in April, but we’ll want to attend till February for Ofgem to substantiate.

‘We would anticipate declining wholesale power charges to additionally circulation into extra aggressive pricing for mounted offers too, however there are laws in place which might be holding again competitors.

‘Ofgem must do extra to encourage suppliers to supply competitively priced offers. We wish to see suppliers be modern with their tariffs to create real factors of distinction to present customers many extra choices.’

Why are there so few fixed-rate power offers?

Energy firms have been gradual to carry fixed-rate offers again onto the market.

The downside started when wholesale power costs started spiking in late 2021. At the time, most households had fixed-rate tariffs, the place they locked in to a unit price and every day standing cost.

This utilized no matter how a lot their power agency was shopping for fuel and electrical energy for on the time – a fragile steadiness.

So when wholesale power costs started to rocket this introduced an enormous downside for fuel and electrical energy companies, lots of whom had been caught shopping for power at way over the value they had been promoting it for to customers.

In response, many power companies collapsed. At its peak the UK as soon as had 70 completely different power suppliers, in June 2018, however that has now fallen to 21, in keeping with Ofgem figures.

Energy companies additionally started mountain climbing the value of fixed-rate offers in August 2021, and by September 2022 there have been no fixes obtainable for brand spanking new prospects in any respect.

These fixed-rate offers started trickling again onto the market from June 2023, however have remained low in quantity and excessive in worth.