My energy supplier, Shell, is offering me a fixed-rate tariff for 14 months that I’m considering locking into. Previously, I was on a fixed tariff until I was switched to a variable tariff earlier this year. Currently, my monthly energy bill for my three-bedroom semi is £162. The unit rate for electricity is 30.72 p/kWh with a standing charge of 43.65p per day. For gas, the unit rate is 7.398 p/kWh with a standing charge of 29.11p.
With this fixed tariff from Shell, the unit rate for electricity would be slightly lower at 30.0010 p/kWh, but the standing charge would be slightly higher at 44.81p. For gas, the unit rate would be slightly higher at 7.5040p p/kWh, but the standing charge would be significantly lower at 18.28p. These rates are guaranteed until November 30, 2024.
I believe that variable rate energy deals will not decrease anytime soon. So, the question is whether I should lock in or wait. Most households are currently on variable energy deals regulated by the Ofgem price cap. This cap sets the average energy bill at £2,074 a year. Although it will decrease to £1,923 on Sunday, it’s not the relief that everyone is hoping for. People are longing for fixed-rate deals that are cheaper than their current high bills.
The big question for me is whether I am being offered one of those cheaper fixed-rate deals. The answer is maybe, but it depends on my gas and electricity usage. If I can reduce my usage, the savings could be even bigger. However, there’s always the uncertainty of future energy prices when considering a fixed rate option.
Currently, my energy bill is £1,945.78 per year. If I switch to the fixed rate deal, I would pay £1,903.25 per year, which is £42.53 less than what I currently pay annually. Although it may not seem like a significant difference, it’s still a saving of £43 a year. Additionally, this fixed rate deal has the potential to offer even more savings due to the expected rise in standing charges and slight decrease in unit rates over the next year.
According to Cornwall Insight, a trusted source for energy price predictions, energy bills will remain at their current level, or possibly even increase, for the next year. The fixed rate offer I am considering is slightly cheaper than staying on the price cap over the 14-month term, assuming Cornwall Insight’s predictions are accurate. However, it’s important to note that energy bill prices are subject to change, and there’s no guarantee.
One advantage of this fixed rate deal is its low standing charges. The typical electricity standing charge for homes on the price cap could reach 60p per day by next summer, whereas the fixed rate offer has a standing charge of 44.81p per day for electricity. By switching to this fixed rate, I could save £62.93 per year on standing charge bills alone. If I combine this with reducing my energy usage, I could potentially save even more.
In addition to potential cost savings, a fixed rate energy deal provides security and ease of budgeting since monthly payments remain consistent. Switching to a fixed deal would offer certainty about what I’ll pay over the full term, unlike the volatility of a standard variable tariff. However, it’s essential to consider any exit fees and the possibility of finding a better deal in the future.
Ultimately, the decision to switch to a fixed rate deal depends on individual circumstances and preferences. The energy market remains unpredictable, and it’s challenging to determine whether a fixed or variable rate will save money in the long run. It’s crucial to carefully weigh the pros and cons before making a decision.
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