Ovo launches one-year fixed tariff – but is it worth switching to?

Scot_39

Marvel1 said:

With the exit fees, I'm wondering if they are certain the prices will drop so locking you in.

If you switch away, there is a new fee to be paid to the new supplier under circumstances like last year.

And that may have increased their exit fee level choice.

And they have a right to cover the cost of securing supply at the fixed rate or insure the risk of not doing so. 

Most non premium rate fixes had exit fees in past.

It's a business, fixed deals are not there to get you a cheaper than market rate deal over the period of the fix.  And when they actually did - meant fixers were being cross subsidized.

And some of the people who fear PP to DD matching post EPG and introduction of social tariffs will punish them in future - are often the very same as those who benefitted from those cross subsidies in past.

Right now Ovo, like the rest of us, are only protected by the EPG price cap at £3000 for three quarters of the fix timescale.  The tariff is £700 below that, £200+ below current £2500, but c£250 higher than July/Oct forecasts.

It's a deal, you like it and can get it - feel free.  But accept the terms and the risks if prices do fall.  And be prepared to pay the £75(s) to exit or the higher but predictable prices 

michaels

I wonder if there is any mechanism in place now to ensure that suppliers hedge their fixes (or have enough capital in the business that they are not willing to just bet the company on future prices)?

ariarnia

Scot_39 said:

It's a business, fixed deals are not there to get you a cheaper than market rate deal over the period of the fix.  and when they did - meant fixers wee being cross subsidized.

not really. having someone signed up for 12 months lets you buy 12 months worth of energy at 'today's' price. meaning the supplier is then protected from price fluctuations - they can increase the cost of there variable rate and supply at a lower price to their fixed rate customers will still getting a guaranteed profit from those customers. its called hedging. 

Scot_39

It's by no means that simple.

As your supplier - or Ovo in this thread / deal case  - is just a middleman.

Edit: And they don't buy it - Ovo are very unlikely, almost gauranteed not, going to rush out and hand over £2200 per customer - yes they can sign contracts for future supply at todays hedged future supply rates - but that's not the same as buying at today's rates.

And hedging in the real world has real costs.  I know - I priced it (in several forms) into sales offers regularly in my old role.

And so take your scenario, it means then the generator/wholesale provider is making lower margin / potentially losing on that deal if costs increase, so would inevitibly up the current market price more to cover it.

So again net result - potentially more expense to those not fixed - a cross subsidy - just more partners in the chain.

Do you really think say likes of Tesco's bulk buying deal discount doesn't increase the charge to smaller wholesalers and hence retailers?

Overall there is a chain and every one in that chain wants their profit slice from our gas or electric bills.  If they cannot secure it from one customer on a cheap fix (or discount), you can be sure they will try to extract it from one not on the fix (or discount).

mrdogcat

Hi, I'm still with Shell Energy since my original supplier went under at the start of the energy crisis.

My new annual projection with Shell for the next 12 months is at: £2,888

However, I was emailed an exclusive offer from MSE for a 1 year fixed tarrif with OVO priced at £2,275 per year for typical use* (note the asterisk)

My question is, would this be a good deal and is fixing now be a good idea? (I never know when the right time to fix is!)

Thanks for your help

Mstty

No one has a crystal ball, predictions say Jul-Dec will be cheaper than the OVO fix but then who knows

https://www.moneysavingexpert.com/news/2023/03/ovo-fixed-deal-after-months-with-no-deals/

MattMattMattUK

mrdogcat said:

Hi, I'm still with Shell Energy since my original supplier went under at the start of the energy crisis.

My new annual projection with Shell for the next 12 months is at: £2,888

However, I was emailed an exclusive offer from MSE for a 1 year fixed tarrif with OVO priced at £2,275 per year for typical use* (note the asterisk)

My question is, would this be a good deal and is fixing now be a good idea? (I never know when the right time to fix is!)

Thanks for your help

The general consensus is that the Ovo fix is not worth it based on the predicted drop in energy costs in Q3 and Q4, but it does depend on your personal appetite for risk.

Alnat1

Forget about estimated cost per month or year.

How many kWh of gas/electric did you use in the last 12 months?  

What is the price per kWh and standing charge offered by Shell? What is the price per kWh and standing charge offered by OVO?

Do some simple maths and work out how much each supplier would charge you for that use.

Then consider which company to choose but remember, the price of energy is expected to fall slightly later this year and Shell's variable rates will probably fall in July and October. The OVO fix is 1 full year and I expect you would have to pay a fee to leave early.