The short answer is that all the signs point to yes. On Wall Street they have a saying “Ignore the noise”, and this is what you will need to do to ensure you make the right decisions regarding your energy tariff. During the coming months the public will be inundated with information and misinformation about the energy market. However there is only one decision you need to make and one piece of information you need to know. The decision is simple, to get a fixed energy tariff or a variable tariff and the information you need, that is the energy price cap.
What is the energy price cap and can it change?
The energy price cap is the limit any provider can raise the prices to and it is set by the government’s energy watchdog Ofgem. What this means for the UK consumer is that even without a contractual agreement on price per kwh, known as a variable tariff, there is a maximum limit to how high their bills can go. The price cap varies by postcode but currently it is set at roughly 23p per kwh for electricity and 4.5p per kwh for gas. These are much lower rates than are available currently with a fixed energy tariff but you might be wondering if these rates can change.
Well, in short yes, the energy price cap can change but it doesn’t very often. Usually, the price cap is evaluated twice per year. Once in April and again in October. Currently, the price cap is in place until April 2022. The price cap that went into effect in October 2021, increased the energy bills by 12% to match with the current wholesale energy prices.
How to Choose a tariff that is good for you?
On Wall Street they say that information is the most valuable commodity. Right now fixed tariffs, which are with an agreed cost per kwh, are much more expensive than variable tariffs that have no agreed cost per kwh. Does this mean that you should get a variable tariff? The answer depends on your personal preference. In case you are good with your energy bill changing every year and you don’t want a fixed rate, you can go for the variable tariff. Of course, it is always good to compare different tariffs and options. When it comes to selecting the right tariff for you though, you need a plan!
“Have a plan!” and “Know the Risk”, The Golden Rules of Wallstreet
The wolves on Wall Street always somehow make money while others are losing it. In the rest of this article you can find ways to save money while others are spending it. First, you have to choose between a variable or fixed rate energy tariff. Usually, variable rates are cheaper but you need to decide if it is worth the risk. If you would rather know what your bill is going to be for one, two or three years and that you have an agreement on price per kwh then a fixed tariff is the best option for you. To find the best value for money fixed rate tariff, you should compare the deals of different energy providers or use a price comparison website to help you.
Following the Energy Market and the Price Cap
The current energy price cap is in place until April 2022. This is good news for the UK consumer, of course, but it will necessitate a re-evaluation of the market in the first quarter of next year. Whether the energy price cap will rise or fall next year will depend on a number of market factors, mainly supply and demand. If the demand increases and supply continues to decrease that will point to an increase of the price cap. Vice versa the opposite is true. For more information about the condition of the market when the time comes, you can check the news, the papers, radio or the official energy market watchdog Ogfem.
If you do not have the time to keep up to date on the market, then it can be useful to contact an energy advice line. There are many free versions of this service in place for the UK consumer that can provide all of the relevant details to help you make the best decision.