Wanting to understand this energy lark before the end of Feb.

JustAnotherSaver

Hopefully someone will have the patience to have a 'sit down' with me on it as my current deal is up at the end of the month.

Shell Energy February 2022 v5 Direct Debit ebill (Fixed)

Electricity: standing charge 18.52p per day
Unit rate: 14.75p per kWh

Gas: standing charge 13.44p per day
Unit rate: 2.49p per kWh

Now generally what I do is when a deal ends I just sign up to one of/the cheapest fixed deal at that moment in time but all I'm seeing in the news is Martin, who'll obviously know more than I do on this, saying for 99.9% of people the best thing is to 'do nothing'.

And this is where my lack of understanding on it shines as to me doing nothing doesn't make sense.

The price of everything just goes up and up and up so if i fix in on a (for example...) 18-24 month deal, then in 18-24 months time it's likely to be dearer than what it is now. In 12 months time it's probably going to be dearer than what it is now.

So I'm looking for someone to explain to me in real simple ways as to why it makes sense to 'do nothing' right now?

And I assume by doing nothing that just means let my fixed roll on to the default variable & then stay there?

Verdigris

I'd still recommend doing nothing and wait until after the April cap comes into force before you look for fixes. There are some, at the moment, that are marginally advantageous but you aren't going to lose a lot by waiting a month or so.

QrizB

I'm going to make some sweeping generalisations here, but bear with me

The variable rate offered to domestic customers is capped by Ofgem. for the past 6 months it's been capped below the cost price of energy and energy companies have been supplying us at a loss.

The cap is revised every six months. The rates applicable from April have been announced. For electricity it's a bit over 28p/kWh and for gas a little over 7p/kWh. (You'll find a table with a detailed breakdown at the link in my signature.) Those rates are double (electric) and triple (gas) your current fix but, with a few exceptions, still less than any fixed rate that's on offer.

The exceptions are loyalty tariffs currently on offer to some customers, including Scottish Power and E.ON Next. As you're with Shell, who aren't currently offering any fixed rates to anyone, you can ignore those.

So, you have the choice:

• Stick with Shell on their capped variable rate;
• Switch to another supplier, on effectively the same capped variable rate; or
  
• Switch supplier to a fixed rate that will be more expensive than Shell's variable rate.

For most people (where they don't get a decent loyalty offer) staying on their current supplier's variable rate is the best bet.

This could all change later in the year. It's possble that wholesale energy prices will fall and suppliers will be able to offer fixed rate deals lower than the variable-rate cap. But at the same time prices could remain high, or even rise. If I could forecast the energy market I'd be sunning myself on my private yacht not participating in internet debate on a 6-year-old laptop. We won't know what's going to happen until it happens.

QrizB

Also ...

JustAnotherSaver said:

The price of everything just goes up and up and up so if i fix in on a (for example...) 18-24 month deal, then in 18-24 months time it's likely to be dearer than what it is now. In 12 months time it's probably going to be dearer than what it is now.

That doesn't always hold for resources like energy.

Here's a chart of 35 years of crude oil prices:

In 2013 I was paying almost 16p/kWh for electricity. That fell to 10p/kWh by 2018, and (thanks to my current fix) hasn't risen up to 16p/kWh yet.
For gas, I was paying 4.3p/kWh in 2014 and that then fell to 2.4p/kWh in 2017. Today on a capped variable tariff I'm paying 4.1p/kWh.

theoretica

JustAnotherSaver said:

The price of everything just goes up and up and up so if i fix in on a (for example...) 18-24 month deal, then in 18-24 months time it's likely to be dearer than what it is now. In 12 months time it's probably going to be dearer than what it is now.

So I'm looking for someone to explain to me in real simple ways as to why it makes sense to 'do nothing' right now?

And I assume by doing nothing that just means let my fixed roll on to the default variable & then stay there?

You can look at what fixes are offered, but it is likely that an expectation of price increases is baked into them.  The energy firms will set the fixed 18/24 month deal at where they expect to make a profit over that time, and as at the moment the limits on the variable tariffs are below the profits they would like to make it seems worth taking advantage of that.