How we price our fixed energy tariffs
29th June 2023
Are you wondering if you should choose a fixed price tariff or stay on a variable tariff? Here we explain how we set the rates for our fixed price tariffs to help you decide.
When we’ll offer fixed tariffs
We know many customers prefer the security of a fixed price tariff. They’ve told us they want the peace of mind that if Ofgem increase the price cap, their prices won’t change.
Wholesale energy prices have come down a little, so we can secure more energy in advance at a lower price. This will then let us offer fixed tariffs to our customers. But wholesale prices are still volatile, and are higher than before the pandemic.
As your energy supplier, we only want to offer fixed price tariffs when we can offer them at a fair price. Then you can make the choice if a fixed tariff is right for you.
We may not always be able to offer fixed tariffs
Wholesale energy prices change a lot and are not stable. Our energy pricing teams are always looking ahead at what might happen with future price caps. We won’t offer our customers fixed tariffs, if we can’t set them at a price that compares well to what we think will happen with the price cap.
How we set the price of our fixed tariffs
When we price our fixed price tariffs, we look at current wholesale energy prices, and consider what we think will happen in future with prices.
To offer customers fixed price deals, energy suppliers, (like us) must buy the energy we’ll supply to you over the length of the contract in advance. You, the customer, promise to stay with the supplier for a set period, so they have the confidence to buy 12 months’ worth of energy for you upfront. Because we can lock in the price you’ll pay for the whole of the contract, we can commit to giving you a fixed price for the energy you use. That’s why many suppliers charge exit fees to households who leave fixed deals early – because they could be left with energy that they’ve paid for and might need to sell at a loss.
How wholesale energy costs affect energy prices
The wholesale price of energy can change a lot, and it's a big part of your energy bill. Sometimes the prices go up, and other times they go down, and this can happen quickly.
Just like anything you buy; the price of energy is affected by how much of it is available and how much people want to use. We, as suppliers, buy a lot of the energy in advance to make sure there’s enough for everyone.
Wholesale energy prices have fallen a little. That’s why from 1st July, the energy price cap comes down to £2,074 (for a dual fuel household paying by Direct Debit based on typical consumption). The price cap is expected to fall again in October, but experts think it will go up again in January.
|Quarterly||Q4 2023 (Oct-Dec) Forecast||Q1 2024 (Jan-Mar) Forecast|
|Gas & Electricity annual cost||£1,959.58||£2,026.12|
Source: Cornwall Insights 25th May 2023.
What happens if prices fall, and you’ve fixed at a higher rate
No one wants to pay more for their energy than they need to. If you choose a new fixed price tariff with us, and we launch an even cheaper fixed price tariff in future because prices drop further, then you can swap to it for free. Or you can switch back to the variable tariff too.
If you stay on a variable tariff, then your prices could go up or down if Ofgem change the price cap.
Why fixed tariffs have an exit fee
By promising to keep our price the same for a set time, we take the risk that the price of the energy we buy to supply you may change during this time. That’s why we charge an exit fee if you leave us, but not if you change to another fixed tariff with us.
Is a fixed tariff right for you?
Choosing between a fixed or variable rate energy tariff is a bit like choosing between a variable or fixed rate mortgage deal. Both have their merits. Check out our handy guide that explains the differences between a fixed and variable tariff to help you decide.
We’re doing more to help our customers through the energy crisis
We think we’ve done more than any other supplier to help customers through the energy crisis with cash grants. We’ve invested more than £200m in customer service and support, including more than £50m in voluntary support for domestic and business energy customers in the UK and Ireland. We’ve also said we’ll donate 10% of British Gas Energy profits until the current crisis is over. We were the first supplier to introduce new lower prices for prepayment customers in April this year too.
Last winter we launched a new energy reduction scheme called ‘PeakSave’ as part of the National Grid ESO service. We’re extending our PeakSave programme with more ways to reward customers for better energy use and help to support a greener, cleaner energy grid.