Millions of households have experienced the impact of rising energy prices in recent years as they were moved onto expensive variable tariffs during the energy crisis. However, some suppliers have quietly started to offer cheaper fixed deals as the price of gas and electricity falls. But there’s another type of tariff that isn’t widely known that could help households save on their bills.
Octopus Energy first launched its tracker tariff in 2017, but withdrew the deal due to rising energy prices. However, it recently relaunched the tracker tariff, but only for existing Octopus customers with smart meters. This tariff tracks the daily wholesale price of gas and electricity and charges customers accordingly, making it the ‘fairest and most transparent tariff on the energy market’, according to Octopus.
So, how does the tracker tariff differ from the standard variable tariff? Both tariffs depend to some extent on the wholesale price of gas and electricity. Suppliers can adjust what customers pay on a standard variable tariff (SVT) when wholesale costs go up or down, but it is ultimately at their discretion. In contrast, the tracker tariff price changes at certain intervals and happens immediately.
However, there are limitations. SVTs have remained at or around the maximum price set by Ofgem’s price cap rules over the last two years. Octopus Energy’s tracker tariff is not protected by the Ofgem price cap, so if the price of gas and electricity rises significantly, customers could end up paying more.
Octopus Energy warns that the tracker tariff is not suitable for everyone and some customers may be better off with a price-capped tariff. The tracker tariff has its own cap, which is higher than the Ofgem price cap, with maximum daily prices for electricity and gas set at 100p/kWh and 30p/kWh, respectively. The average standing charge for the tracker tariff is lower than the Ofgem cap at 44.71p/day for electricity and 26.84p/day for gas.
Gareth Kloet, an energy expert at GoCompare, advises caution when considering the tracker tariff. He highlights the lack of protection from the Ofgem price cap and the potential for high bills if wholesale prices increase. Furthermore, tracking the price of wholesale energy daily requires a deep understanding of the market and regular monitoring.
Rebecca Dibb-Simkin, chief product officer at Octopus Energy, suggests that the tracker tariff can be beneficial for customers who can adjust their energy usage to days when the prices are lower. However, Nathalie Mathie, an energy expert at Uswitch.com, emphasizes that fixed tariffs offer certainty over pricing for a set period of time, usually 12 months.
Despite the potential benefits of the tracker tariff, some energy experts believe that it may not be suitable for the general public due to its complexity and daily price fluctuations. Other suppliers have been slow to offer their own tracker tariffs, but this may change in the future. It is worth noting that Octopus Energy’s tracker tariff is still in beta.
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