is there a catch - energy fixing

mandytelford

hi - can anyone tell me if there is a catch to taking energy provider up on energy fixing? do we have to pay a lump sum up front, agree to a higher than current rate or what- it just seems too good to be true that we have never bothered considering.. surely energy providers wont just say ok we are going to increase prices but if you want you can keep paying current price for next 2 years..if so why not just say we wont increase the price for 2 years for everyone?

nickcc

I've just switched and fixed until March 2017. The extra initial cost for the first year was app 15% but after recent price increase now works out to 5%. If annual increases continue the way they have over the last few years by this time next year I should be 5% better off.
Fortunately with my switch there is no early get out charge so if by any chance the Government force the big 6 to reduce their charges I can always switch again.

Horseunderwater

Of course there will be a catch. It's finding out what it is that takes the time.
I recently rang BG for something else entirely and this very subject came up. Their version is fix n fall 2014. Apparently you can do this on a ppm too. So I asked the chap to explain it to me. Current average daily spend on Gas £3.41/pa under fix n fall it would go up to £3.61/PA. If I chose to go for the longer terms fixed price to March 2016 it would be £3.87 - so I asked how that saved me money? Dead silence on the other end. Then he says well the prices of our gas could go down! Call me a cynic, but I am far from a mug. This was worked out on the old current prices BTW. So all I would say is be very careful.

victor2

mandytelford wrote: »

hi - can anyone tell me if there is a catch to taking energy provider up on energy fixing? do we have to pay a lump sum up front, agree to a higher than current rate or what- it just seems too good to be true that we have never bothered considering.. surely energy providers wont just say ok we are going to increase prices but if you want you can keep paying current price for next 2 years..if so why not just say we wont increase the price for 2 years for everyone?

If you choose a fixed tariff, there is no lump sum to pay up front, you just usually pay a higher kWh rate than available variable tariffs offer, but you ensure your rate will be fixed for the duration of the tariff. You are taking a (pretty small) gamble that variable rates will increase above your fixed rate before the end of the tariff and over the duration of the tariff, you will come out ahead of the game. Plus you can guarantee what you'll be paying per kWh while on that tariff.
If you choose a fixed tariff with no exit penalty, then should prices fall, or better fixes come along, you can switch away at no extra cost.

macman

Fixing is simply buying an insurance policy against further rises, there is no guarantee that it will be cheaper over the full term.
It's not whether to fix, but at what rate you fix, that matters.

nickcc

macman wrote: »

Fixing is simply buying an insurance policy against further rises, there is no guarantee that it will be cheaper over the full term.
It's not whether to fix, but at what rate you fix, that matters.

But if you have a get out of the deal free card, like my 2017 fix with npower, I'm not sure how you can lose.

macman

nickcc wrote: »

But if you have a get out of the deal free card, like my 2017 fix with npower, I'm not sure how you can lose.

Because you are paying for the last year and now a higher price than you could get elsewhere. You can switch out free if price increases slow down enough to make your fix uneconomic, but then you won't recover the extra you've paid.
Long term fixes will generally only pay back in the last couple of years if prices continue to rise steeply each winter as in the past. This is why they're structured that way-to hook you in for a 3 or 4 year term, even if there is no ETC.

Cardew

nickcc wrote: »

But if you have a get out of the deal free card, like my 2017 fix with npower, I'm not sure how you can lose.

At present you are paying more than you would if you had a cheaper tariff - even a cheaper fix to, say, 2015.

For instance you may be paying, say, £100pa more in 2014 than a cheaper tariff. So you are £100 out of pocket.

In 2015, you could be paying £50 less than the cheapest available tariff, so now only £50 out of pocket.

In 2016 you could be paying £150 less than the cheapest available tariff so overall you have now saved yourself £100.

nickcc

Cardew wrote: »

At present you are paying more than you would if you had a cheaper tariff - even a cheaper fix to, say, 2015.

For instance you may be paying, say, £100pa more in 2014 than a cheaper tariff. So you are £100 out of pocket.

In 2015, you could be paying £50 less than the cheapest available tariff, so now only £50 out of pocket.

In 2016 you could be paying £150 less than the cheapest available tariff so overall you have now saved yourself £100.

Sorry still can't see how I'll be losing over 4 Winters. If, for example i was paying £1000 per annum to BG than switched to NPower and was then paying £1150 per annum. BG and NPower then increase their prices 4 weeks after I've switched so now the new prices would be £1100 and £1150 so I'm paying £50 per annum more to NPower. This time next year the unfixed price then rises to £1210 and my fixed price stays at £1150 so I'll be paying £60 less when prices rise next Winter. Take this to the following year and I'll still be paying £1150 when the unfixed price will be £1321 £171 more than I'll be paying, then the year after when I'll still be paying £1150 and the unfixed price will be £1453 which, if price increases continue at 10%, should give me a total saving of £484 over 4 Winters. All this is based on increase being maintained at 10%, if by any remote chance fuel prices come down I can then switch again without any penalty charges. My post was mainly intended for Macman but quoted the wrong post.

apt

You are currently paying about 15% more for your energy than if you took out the best 12-18 month fix. So if prices were to go up 10% per annum you'd make a saving (although for moderate users that could be matched by the couple of rounds of cashback that you would miss out on by having a longterm fix). If prices don't go up much you'll end up paying more but at least have the security of stable prices. Being able to switch without charge would not claw back the losses of paying substantially more over the next 12/18 months.

victor2

nickcc wrote: »

Sorry still can't see how I'll be losing over 4 Winters. If, for example i was paying £1000 per annum to BG than switched to NPower and was then paying £1150 per annum. BG and NPower then increase their prices 4 weeks after I've switched so now the new prices would be £1100 and £1150 so I'm paying £50 per annum more to NPower. This time next year the unfixed price then rises to £1210 and my fixed price stays at £1150 so I'll be paying £60 less when prices rise next Winter. Take this to the following year and I'll still be paying £1150 when the unfixed price will be £1321 £171 more than I'll be paying, then the year after when I'll still be paying £1150 and the unfixed price will be £1453 which, if price increases continue at 10%, should give me a total saving of £484 over 4 Winters. All this is based on increase being maintained at 10%, if by any remote chance fuel prices come down I can then switch again without any penalty charges. My post was mainly intended for Macman but quoted the wrong post.

You'll only lose out if prices don't go up significantly beyond your fixed rate.
Suppose prices remain flat (we can all dream or believe stupid politicians) and you end up still paying above the variable rates in a couple of years. Yes you can get out of your fixed deal without an additional penalty, but you've already paid out more than you would have done had you not fixed.
Personally, I do believe in fixing, and have always ended up ahead of the game by the end of the tariff. The lack of a penalty for leaving early just eases the gamble on fixing a bit.