Should I go onto higher Ovo fix?

bumblestil

Hi. I have a Better Energy (online only) fix with Ovo till November. They are trying to persuade me to change to a new fix now for 2 years, at 0.09p/unit more than I'm currently paying. I can't work out whether this is a good idea or not - pay more for 4 months so it only goes up a bit, or wait and see what I can do in November but risk it going up much higher. I'd prefer to stick with Ovo than go with a company that doesn't have a good reputation - also, I owe them quite a bit right now and don't want to pay it all back at once if I can spread the cost through my bills (which they seem happy to allow).
Thanks,
Paul.

footyguy

bumblestil wrote: »

Hi. I have a Better Energy (online only) fix with Ovo till November. They are trying to persuade me to change to a new fix now for 2 years, at 0.09p/unit more than I'm currently paying. I can't work out whether this is a good idea or not - pay more for 4 months so it only goes up a bit, or wait and see what I can do in November but risk it going up much higher. I'd prefer to stick with Ovo than go with a company that doesn't have a good reputation - also, I owe them quite a bit right now and don't want to pay it all back at once if I can spread the cost through my bills (which they seem happy to allow).
Thanks,
Paul.

No one knows the future prices of energy.
If they thought they did, they would not be posting here, but would be earning millions on the markets.

As money saving does not appear the important factor in your decision, then that makes it a simple decision for you to decide.
Do you want the security of knowing what price you will be paying for the next 2 years, or are you happy to pay the price quoted to you come the end of your present contract?

System

Using gas as an example, the wholesale cost of gas equates to 39p in every £1. Looking at Zog's prices, the one year price for me is £15 less than the 2 year price. I pay £360 per year for gas on a one year fix. If I switched to a 2 year deal then I would pay £375 a year for two years. It follows that the 2 year fix only makes sense if my increase in year 2 was £30 or more for that year. Assuming, all other costs remain the same, then the wholesale price of gas would have to increase as follows:

Cost of wholesale gas in one year fix = £360 * 0.39 = £140.40

Adding £30 in year 2 gives an increase of 30/140.40*100 = 22%

In sum, if you believe that the wholesale price of gas will increase by 22% or more in the next 12 months, then a 2 year fix is going to be cheaper than two one year fixes.