- Many energy firms have deals that undercut the Ofgem price cap from January
The average household energy bill will rise to £1,738 from January – but it may be possible to beat the hike and save more than £140 a year by swapping to a fixed-rate deal.
The typical home currently pays energy bills of £1,717 a year, for a deal with prices set by regulator Ofgem’s price cap.
This will rise to £1,738 from 1 January 2025, or 1.2 per cent, for those on variable-rate energy deals regulated by the price cap and using average amounts of gas and electricity.
But households may be able to beat the cap and save money by taking out a fixed-rate energy deal.
At the moment, most energy deals are variable. That means they change price, normally four times a year when Ofgem adjusts its price cap.
Fixed rates, as the name suggests, offer set prices for unit rates (the energy used) and standing charges (daily fees paid regardless of any energy used).
Before the energy crisis of 2021, most energy deals were fixed rate, with variable rates reserved for homes that had fallen off a fixed deal and not taken out a new one.
But if you can find a fixed rate cheaper than the price cap then you can save money on your energy bills.
The top ten cheapest energy deals range from £1,597 a year to £1,636.
The current cheapest fixed rate energy deal is from E.On Next, for £1,597 a year, or £141 less than the 1 January price cap.
| Energy firm | Deal | Term | Price | Saving vs Jan price cap | Exit fees |
|---|---|---|---|---|---|
| E.On Next | Next Fixed 18m v7 | 18 months | £1,597 | £141 | £50 per fuel |
| Outfox The Market | Fix’d Dual Nov24 v2.0 | 12 months | £1,606 | £132 | £25 per fuel |
| EDF | Simply Fixed 1Yr Jan26 | 14 months | £1,608 | £130 | £25 per fuel |
| British Gas | Fixed Tariff 18M | 18 months | £1,608 | £130 | £50 per fuel |
| Octopus | Octopus 12M Fixed November 2024 v2 | 12 months | £1,609 | £129 | None |
| Co-op Energy | Co-op 12M Fixed November 2024 v2 | 12 months | £1,609 | £129 | None |
| Outfox The Market | 18-Month Fix’d Dual Nov24 v5.0 | 18 months | £1,611 | £127 | £50 per fuel |
| E.On Next | Next Reward Days Fixed 12m v1 | 12 months | £1,620 | £118 | £50 per fuel |
| E.On Next | Next Fixed 12m v35 | 12 months | £1,620 | £118 | £50 per fuel |
| Sainsbury’s Energy | Sainsburys Fix and Reward Fixed 18m v6 | 18 months | £1,636 | £102 | £50 per fuel |
| Source: Uswitch | |||||
Beware strings attached to fixed rate energy deals
Saving money by taking out a cheaper fixed rate might seem like a no-brainer, but there are some potential strings attached.
Firstly, all the above figures are averages only. If you use more energy, you will still pay more with a fixed deal, as it only sets the cost of each unit of gas and electricity you use.
Secondly, many fixed rate deals come with expensive exit fees of up to £100 per fuel.
Even in the table above, six out of ten deals have exit fees of £50 per fuel.
Exit fees can worsen the third potential problem with fixed rate deals – the fact that no-one can predict the future.
All these fixes currently work out cheaper than a household would pay by staying on the price cap.
But they also rely on energy prices not dropping further in the 12 to 18-month period of the fixed term.
If energy prices do fall, consumers would be better off swapping to a cheaper fix, or maybe even staying on a variable rate limited by the price cap.
Expensive exit fees can serve to lock consumers in to more expensive energy deals, as it becomes cheaper to stay than move.
Energy prices are expected to fall again in April and then July, according to experts at Cornwall Insight, but the firm has not yet said by how much.
Cheaper fixes may be available
There may be cheaper fixed-rate deals out there than the ones listed above, but these are hidden from view.
Energy firms are free to sell fixes to their own customers only, and do not have to disclose these rates to the wider world.
If your energy firm contacts you about an exclusive fixed rate, check how it compares in price to what you pay now and what you’d pay in October.
