Gas Prices – Can somebody please help me understand…

PennineLady

Hi, I hope somebody here can help me understand this British Gas offer.

I received an email today from British Gas. Here's an excerpt:

“Fix your energy prices for peace of mind - You’re on a variable tariff right now. This means if energy prices go up, your bills go up too. With a fixed tariff, your gas and electricity rates are exactly that – fixed, so your bills will only go up if the amount of energy you use increases.
We know the recent price rises are putting an extra burden on homes across the country.
There’s so much uncertainty still in the energy market, and industry sources have advised that the price cap in October is expected to go up by £1500 taking the national average to £3,500 a year, and could increase at the next price cap in January 2023 to £3,850.”

So, what I want to understand is, how can British Gas afford to make me (and probably everyone else) this offer? If the prices increase as predicted, or even more, who pays for the shortfall?

For me, with so much uncertainty still in the energy market, why can't they put their efforts into giving everybody a fair deal/price.

I just can’t get my head around it.

Kindest regards.

Evan3020

Because its the same for them, they want a fixed income from the fixes and the rest they will let float.

elsien

The fixed tariff will be a lot higher than the current variable rate.  The numbers they will accept onto the the fixed rate will not be open to everyone - once they’ve got a certain number they will close the offer and put out a higher one.  You would be paying a higher rate now in the hope that over the next couple of increases you’ll end up paying less than if you hadn’t moved. The supplier  will also be taking  account of that from their side as well so it’s not so low that they hugely lose out.
Not everyone wants a fixed rate - depending on the offer some are preferring to sit on the SVR and see what happens. 

Either way it’s a gamble based on best guesses and predictions. 

pochase

As we don't know what offer has been made to you we will have problems to tell you anything.

They might have offered  you a fix that is still higher than the SVT.

spot1034

Energy companies buy in advance, so having secured a certain amount of electricity or gas at a pre-arranged price they can then offer it to a certain number of customers - however many it takes to use up the amount they've bought. It's a bit like you buying tins of food to store in your cupboard, knowing that you're protected from any price rise until your supply of tins has been used up.