12 or 24 month fix? I can't quite decide.

jonronnquist

My existing fixed rates for gas and electricity are 20% below the current Ofgem market cap, but these will expire at the end of this month. 

The renewal options now on the table from my supplier (Eon) are:

1) Next Flex - their variable rate which would see my bill go up (if I switch today) by 25% to the effective current Ofgem cap for two months, then rise by what I understand will be anything from 46 to 51% from April.

2) Next Online V9 - a 12-month rate fixed at 34% above the current Ofgem cap.

3) Next 2 Year V17 - a 24-month rate fixed at 71% above the current Ofgem cap.

I guess option 1 is not really an option at all as I would simply lose my 20% discount for February and end up on the same tariff anyway. That's assuming Next Flex and SVR are the same thing, which they might not be for all I know. 

Even adding in the penalty of switching early, the effective price increase for the 12-month fix would still only be 36% above the current Ofgem cap. If that cap rises by another 20% in October as predicted by Cornwall Insight, it represents a 9% discount on the likely Ofgem cap rates for the year as a whole. This tariff has no early exit fees.  

The 24-month option looks like a bad idea at first glance, but I can see the logic. Assuming both cap increases above happen as predicted, it's only 15% above what I would be paying on the SVR over the first year, a premium that could easily turn into a net discount if the cap continues to rise in both April and October 2023. This tariff also has no early exit fees. 

The only clear justification I can see for going with the 24-month option over the 12 is the possibility that cap prices will continue to rise dramatically from April 2023, and anyone not locked into something better already is going to be swept down the river. War in Ukraine? Then again, the conflict might be over by then and a sanction-riddled Russian Federation could be dumping gas on the wholesale market at any price it can get. in that light, the 12-month fix seems like the prudent middle ground.  

I guess what I'm asking is; does anyone have any wisdom to add to my simplistic view of the problem? Considering the original renewal offers I received from Eon just a few weeks ago were all far, far worse, do they know something I don't? 

QrizB

jonronnquist said:

I guess option 1 is not really an option at all as I would simply lose my 20% discount for February and end up on the same tariff anyway. That's assuming Next Flex and SVR are the same thing, which they might not be for all I know.

Correct, Next Flex is their SVR. If you do nothing you'll be put onto that tariff at the end of your fix.

You haven't mentioned the rates offered in the fixes. The current Ofgem cap is around 4.1p/kWh for gas and 21p/kWh for electricity. We don't know the April cap yet (it's due to be announced early next week) but gas is likely to be over 7p/kWh and electricity around 30p/kWh.

Depending on what the cap turns out to be, one or both of those fixed rates could be quite attractive.

jimjames

QrizB said:

jonronnquist said:

I guess option 1 is not really an option at all as I would simply lose my 20% discount for February and end up on the same tariff anyway. That's assuming Next Flex and SVR are the same thing, which they might not be for all I know.

Depending on what the cap turns out to be, one or both of those fixed rates could be quite attractive.

Alternatively if the government pulls something out of the hat then they might be less so.

daveaspy

jonronnquist said:

Even adding in the penalty of switching early, the effective price increase for the 12-month fix would still only be 36% above the current Ofgem cap. If that cap rises by another 20% in October as predicted by Cornwall Insight, it represents a 9% discount on the likely Ofgem cap rates for the year as a whole. This tariff has no early exit fees.  

if you mean penalty for leaving your current contract early, you can switch without penalty within the last 50 days of the contract

lohr500

Its a tough one isn't it!
I am fortunate that I don't have to make a similar decision, but I think if I were in your shoes I would grab the 12 month fix for now and see what happens with the market over the next few months. Bank the likely saving from the 1 year fix vs new SVT and use that as a buffer for year 2 if things don't get better.

My gut feel is that in the event of no reduction in the market driven wholesale prices, there will have to be some form Govt intervention to soften the pricing. I would probably bank the likely saving from the 1 year fix vs new SVT and use that as a buffer for year 2 if things don't get better.

jonronnquist

QrizB said:

jonronnquist said:

I guess option 1 is not really an option at all as I would simply lose my 20% discount for February and end up on the same tariff anyway. That's assuming Next Flex and SVR are the same thing, which they might not be for all I know.

Correct, Next Flex is their SVR. If you do nothing you'll be put onto that tariff at the end of your fix.

You haven't mentioned the rates offered in the fixes. The current Ofgem cap is around 4.1p/kWh for gas and 21p/kWh for electricity. We don't know the April cap yet (it's due to be announced early next week) but gas is likely to be over 7p/kWh and electricity around 30p/kWh.

Depending on what the cap turns out to be, one or both of those fixed rates could be quite attractive.

The rates for the 12-month fix are: 

Electricity: 26.79p/kWh / 49.3p/day SC
Gas: 5.65p/kWh / 42.31p/day SC

and the 24-month fix is:

Electricity: 33.51p/KWh / 43.31p/day SC
Gas: 9.14p/kWh / 21.01p/day SC

jonronnquist

daveaspy said:

jonronnquist said:

Even adding in the penalty of switching early, the effective price increase for the 12-month fix would still only be 36% above the current Ofgem cap. If that cap rises by another 20% in October as predicted by Cornwall Insight, it represents a 9% discount on the likely Ofgem cap rates for the year as a whole. This tariff has no early exit fees.  

if you mean penalty for leaving your current contract early, you can switch without penalty within the last 50 days of the contract

No, I meant the "penalty" for giving up a month of my current below-cap rate. Roughly £23.00. 

jonronnquist

Turns out there is no penalty as if I renew today, the new tariff will kick in the day after my current one ends. So the 12-month fix is going to be 34, not 36% above the current Ofgem cap. That has to be a good deal no matter how you look at it. 

jonronnquist

jonronnquist said:

daveaspy said:

jonronnquist said:

Even adding in the penalty of switching early, the effective price increase for the 12-month fix would still only be 36% above the current Ofgem cap. If that cap rises by another 20% in October as predicted by Cornwall Insight, it represents a 9% discount on the likely Ofgem cap rates for the year as a whole. This tariff has no early exit fees.  

if you mean penalty for leaving your current contract early, you can switch without penalty within the last 50 days of the contract

No, I meant the "penalty" for giving up a month of my current below-cap rate. Roughly £23.00. 

Correction: So the £23.00 is moot, but I will still be paying an extra £69 above the Ofgem cap rate for March by switching now instead of defaulting to SVR at the end of Feb. But once the cap is announced next week, will Eon still be offering these fixed rates? I somehow doubt it very much unless a bidding war breaks out among suppliers. Which seems unlikely given the current climate. 

QrizB

jonronnquist said:

Turns out there is no penalty as if I renew today, the new tariff will kick in the day after my current one ends. So the 12-month fix is going to be 34, not 36% above the current Ofgem cap. That has to be a good deal no matter how you look at it. 

In your position I would seriously consider taking the 12-month fix. There's barely any chance of the unit rates in the April cap being lower than that.

The exception would be if you use significantly less energy than average, in which case the elevated standing charge might offset any saving from the lower unit rates.

Boris_Blank

jonronnquist said:

The rates for the 12-month fix are: 

Electricity: 26.79p/kWh / 49.3p/day SC
Gas: 5.65p/kWh / 42.31p/day SC

and the 24-month fix is:

Electricity: 33.51p/KWh / 43.31p/day SC
Gas: 9.14p/kWh / 21.01p/day SC

Thats interesting, the rates appear to been changed in the past few days for the NextOnline V9 Tariff!

These are the rates I went for just this past Friday:

Electricity: 26.95p/kWh / 43.58p/day SC  
Gas: 5.49p/kWh / 42.31p/day SC

For me as a heavy user, it would work out as a 2% increase had I delayed in taking the fix.  I would think it will jump again after tomorrows CAP announcement if not before.