Fixed rate tariffs increase in mid-year

Clamshell

In August 2023 I signed up for a 12 month fixed rate tariff with Octopus. I thought that would mean no changes for 12 months. But after only 9 months, they have increased the DD by more than 10%. So, that's not fixed rate is it? How can they do this?

spot1034

The unit prices and standing charges are fixed, but you still have to pay for what you use. Adjusting the DD to cover your usage is perfectly normal. 

BarelySentientAI

Clamshell said:

In August 2023 I signed up for a 12 month fixed rate tariff with Octopus. I thought that would mean no changes for 12 months. But after only 9 months, they have increased the DD by more than 10%. So, that's not fixed rate is it? How can they do this?

It's fixed rate because the unit price hasn't changed.

It's not fixed cost because energy tariffs aren't an all-you-can-eat buffet.

[Deleted User]

Following your logic, you could use as much energy as you like for no extra cost.

The rate they charge hasn't changed, they've simply adjusted the direct debit to match your consumption.
It's better that they do it now, rather than leave you with a large unexpected bill later on...

[Deleted User]

Clamshell said:

In August 2023 I signed up for a 12 month fixed rate tariff with Octopus. I thought that would mean no changes for 12 months. But after only 9 months, they have increased the DD by more than 10%. So, that's not fixed rate is it? How can they do this?

Hi - so just to explain things a bit, the thing that is fixed is the rate that you pay per kWh (unit) of electricity or gas. For example, if the rate you agreed was 25p/kWh for electricity then that's what you'll pay for the whole of the 12 months. But the more you use, the more you pay, so if you are a low user and use, say 1000kWh over the course of the year you'll end up paying 1000 x 24p = £240. But if you're a higher user you might use 5000kWh and over the course of the year you'll end up paying 5000 x 24p = £720. So the rate is fixed but the amount you actually pay will be different.

The thing that we see quite a lot of questions about here is about how they quote you and why the "fixed" direct debit can change during the year. When the energy suppliers give you a quote for a fixed rate, they give you an estimate of what you'll use over the year and divide it by 12 to give you an estimated monthly payment. So if you take the example above for a low user using 1000kWh per year, the quote would say something like your unit cost will be fixed at 24p/kWh and your estimated monthly cost will be £20 (which is equal to 1000 x 24p / 12). The energy company keeps an eye on what you're using and if it looks like you're going to use more than they estimated, they will increase your direct debit so you don't get to the end of the year, find you haven't paid enough and end up with a big bill for the under-payment which you then have to carry over to the next year.

Hope this makes sense?

FreeBear

[Deleted User] said: When the energy suppliers give you a quote for a fixed rate, they give you an estimate of what you'll use over the year and divide it by 12 to give you an estimated monthly payment. 

The energy company keeps an eye on what you're using and if it looks like you're going to use more than they estimated, they will increase your direct debit so you don't get to the end of the year, find you haven't paid enough and end up with a big bill for the under-payment which you then have to carry over to the next year.

And if you look at your monthly bill, it will tell you what your estimated annual cost is. Then beside the electricity & gas sections, there will be an estimate of your kWh usage. These figures get updated each time the bill is issued, so with the aid of a calculator, you can see if your monthly (fixed) direct debit is set too low.

I've seen my annual estimates drop each month for gas, so my DD is now slightly higher than it needs to be.

Netexporter

Clamshell said:

In August 2023 I signed up for a 12 month fixed rate tariff with Octopus. I thought that would mean no changes for 12 months. But after only 9 months, they have increased the DD by more than 10%. So, that's not fixed rate is it? How can they do this?

Do you send regular meter readings (or have a working smart meter to do it for you)? Are the readings quoted on the bills appended with an E for estimate?

pseudodox

Oh dear.  Another example of misunderstanding that there is no such tariff as "all you can eat" for a fixed price.  Makes you wonder how big this issue is outside of this forum which only has a small proportion of the energy customers out there.

Scot_39

Fixed Rate is not Fixed Price.

Price = Units Used x Rate + Standing Charge

Variable = Variable x Fixed + Fixed

Use more units pay more - use less units pay less.

wrf12345

Or pay for what you use by switching to variable DD (via telephone with Octopus), but budget for increase in winter or buy snow-suits to wear in the house. To be fair to energy co's they have been told by Ofgem not to let people get into debt but many co's will try to increase even if showing a credit balance.