Should I fix with Octopus Energy? I really don't understand all this!

AmboGuy

Hi, first post so go easy. 

I am currently getting my gas and electricity from Octopus Energy on the Flexible Octopus tariff. I currently pay around £170 a month which works out roughly £2070 annually. 

I did a comparison on their page and if I fix now to a yearly tariff the monthly prices are almost identical (literally around £5 a month difference) with no fees. 

Should I fix now or wait until July? Will the fixed deal be cheaper in July? Should I even fix at all? I'm really trying to understand all the different tariffs but I just don't get how it all works. I would assume it would be cheaper in July and I should fix then but I've seen other people.saying to fix before July which makes no sense to me (but then, like I say, I'm just not getting how this all works).

Reed_Richards

The first thing you need to do is to ignore the monthly direct debit you are being quoted and compare the actual tariffs.  How much per kWh for your gas and electricity now, and if you fix, what the standing charges are now, and if you fix.  Ultimately you pay for what you use.  If the monthly direct debit is set too low you will move into debt and have to pay more to clear the debt.

Back in the old days supply companies would offer you a fix at cheaper than their standard rate to lock you in as a customer.  These days it's more of a gamble.  If you heat with gas then you most probably use most of your gas over winter.  So if you think gas prices will have risen by next winter then it would make sense to fix at the current tariff, if you can.  But if you think gas prices will have fallen then fixing at the current tariff, if you could, would cost you money.

With Octopus it's even more complicated because they have a range of "special" tariffs that will work out cheaper under the right circumstances.  Somebody else may be able to advise on those.     

spot1034

There is no reason why the fix would be cheaper in July, and given the way wholesale prices have spiked recently (although they fell back a bit from their high yesterday) it would seem more likely that in the near future at least, fixes will become more expensive. 

This assumes the recent spike in prices isn't reversed in the next couple of months. We are currently quite early in the 3 month  assessment period which will determine the price cap from October to December. If prices stay high as we go through that, it is inevitable that the SVR will rise in October - if prices fall back, that will bring the average price for the period down a bit and moderate the increase, although I think most people who watch these things would agree that a price increase from October is very likely.

If you fix at around the level of the present flexible rate, you will lose the benefit of lower prices on that which have already been announced for July to October, but you could well be paying less after that. To confuse the matter still further, to determine whether taking a fix is worthwhile you also have to predict where prices on the standard variable will be in the first half of next year, and frankly no one knows that yet. The judgement you have to make is whether you want the certainty of a fix compared with taking a chance that you might be better off staying on the standard variable. 

If there is no exit fee ( a penalty if you leave the fix early) that makes the decision easier but you still have to decide whether you're happy to pay a higher price in the short term in return for a possibly bigger saving later. Good luck! 

BarelySentientAI

AmboGuy said:

 
Should I fix now or wait until July? Will the fixed deal be cheaper in July? Should I even fix at all? I'm really trying to understand all the different tariffs but I just don't get how it all works. I would assume it would be cheaper in July and I should fix then but I've seen other people.saying to fix before July which makes no sense to me (but then, like I say, I'm just not getting how this all works).

Why would you assume it will be cheaper in July?  

The price cap has almost nothing to do with fixed rates.

Fixed rate deals are based on what the supplier thinks will happen over the while period of the deal (or what they can sign forward contracts for).  The price cap is based on what has happened over the last few months.  These are very very different things.

Fixed rates are there to offer certainty on unit price, not to guarantee being the cheapest possible tariff throughout their life.

AmboGuy

Ok thanks folks. It seems it is more complicated than I first thought! 

I think I'll probably just leave it now as I really don't know if I'll save any money or not! 

nyermen

As an example, I have fixed with octopus, just for peace of mind over the next year.  It's not cheaper than the variable rate on offer, and I believe the caps drop a bit soon which could widen it a bit more, but my fix covers the winter (where it may rise), and is zero exit fees, so if I find it comes too much more expensive, I can always switch out.

MeteredOut

AmboGuy said:

Ok thanks folks. It seems it is more complicated than I first thought! 

I think I'll probably just leave it now as I really don't know if I'll save any money or not! 

No-one does. Fixing does not guarantee to save you money - it only guarantees a fixed rate for the energy you use.

It might do, or it might cost you more when you look back in 12 months.

MP1995

The answer is probably

If the fix prices now give you peace of mind for this winter and a known budget for your energy usage then it might be a good idea to fix now.

Those with a more flexible budget and able to ride the prices can delay and even take a small risk on smart meter agile and tracker tariffs.

pete-20-11

Exactly that, it's about appetite to risk.