Fix your energy before prices rise
History tells us that energy firms tinkering with their tariffs often signals incoming price hikes, so with both Scottish Power and Npower each making changes to their tariffs, is now a good time to fix your energy prices?
The changes aren't confirmation of imminent price hikes, but it is certainly of interest that Scottish Power has pulled its cheapest online variable rate deal and its cheapest fixed tariff, and replaced the fixed tariff with a more expensive one but not yet launched a new variable rate deal. Similarly, NPower pulled its cheapest fix and replaced it with a more
expensive fixed rate deal, while reducing the price of its online variable rate product.
Adding to that speculation, Centrica (owner of British Gas) has warned householders that prices may rise later in the year, since the wholesale prices of gas has jumped 15% year-on-year. They say it could add a further £50 to the average annual heating bill.
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We saw similar movements last year in the months leading up to a market-wide round of price hikes from all of the Big Six energy firms in the summer. Fixing your energy prices before a sharp increase could save you money, but there's always a chance of prices falling - which means you'd miss out on savings.
Often, when firms change their tariffs, the more attractive online deals they offer have variable rates. Though they may be attractive at the time of launch, they are subject to change in line with wholesale energy prices, which means they could become a lot more expensive than that initial rate. This is why the fixed rate option could prove better value in the long run.
Energy firms can't just up their prices at the drop of a hat though, as they have to allow 30 days between announcing any price increases and implementing them.
Also, back in January when the Big Six announced they would be lowering prices, Scottish & Southern Energy (SSE) said that it would be capping prices until October 2012 - so even if there is a market-wide round of price hikes, SSE customers will be safe at least until October.
Of course if you've previously fixed your energy prices and price hikes do happen, you won't feel the effects. But if you are on a variable rate, here are some more details on fixing.
Are fixed rate deals cheaper?
A fixed rate tariff might not be cheaper than other rates on the market right now, but if the Big Six do decide to put prices up later in the year you could find yourself better off.
Fixed rate deals are often a little more expensive than standard deals because they protect you against price hikes. Paying a little more for a fixed deal now could save you in the long term, though.
Choosing a fixed deal
If you're going for a fixed deal it's important to look at how long the fix will lock you in for, as well as the price you'll be paying. Generally speaking, the longer you want to fix for, the more expensive the deal will be, as you're protected for longer from price hikes.
You should also look at exit fees, because if you do fix and there's a huge market-wide price drop, you may have to buy your way out of the fixed deal.
The alternative option is to go for a capped energy deal, which ensures you do not pay more than a set amount over an agreed period (though you could pay less if prices fall).
With the first hints of warmer weather starting to show, many of us will stop thinking about our heating and energy bills, but acting now could be beneficial come the colder months. Visit our energy channel to find out more. We can help you compare what's on offer from all the UK's leading suppliers and guide you through the switching process to a better deal.
MoneySupermarket energy expert Scott Byrom (pictured) says Scottish Power and npower's recent changes could be significant.
He said: "Scottish Power and npower both removing and changing their best fixed energy tariff in recent weeks is certainly something to sit up and take notice of and could certainly be early indications of a potential price change.
"Those wanting to be proactive and protect their finances couldn't switch at a better time by looking at EDF Energy's "Blue + Price Promise" which offers consumers fixed rates until Sept 2013 with no termination fee should you switch if prices where to fall between now and then.
"Opting for this tariff really is a no-brainer for those wanting to ensure they are on the best deal for their household energy.
"The announcement from Centrica further supports the urgency around getting on the best deal NOW before the best deals go up in price as we've already started to see."
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.