As energy prices continue to exceed record levels, households are facing ever-increasing energy bills. The price cap has been implemented to help control the amount a household pays per kWh, but there’s a question of whether to fix energy prices until 2023.
Should I fix my energy prices until 2023?
You should only fix your energy prices until 2023 if you can source a cheaper fixed tariff than that of the October 2022 price cap increase. The market is incredibly tough at the moment, so finding a cheaper tariff may not be possible.
Currently, the fixed tariffs offered by energy suppliers are more expensive than the current price cap, reflecting the market’s expectation of further increases in energy costs.
On Friday the 26th of August, Ofgem will announce a significant rise in the current price cap commencing 1 October 2022. In October 2022, it may be possible to make savings by switching to a fixed-rate contract. We recommend waiting until the new price cap has taken effect before using a home energy comparison service.
Keep an eye out for wholesale energy prices with our monthly market updates.
What is the energy price cap, and how does it affect me?
However, the overall cost of your bill is not included within the price cap. Your bill is calculated depending on your usage for the month. The more energy you use, the higher your energy bill will be.
The price cap doesn’t apply to you if:
- You are on a standard variable green energy tariff.
- Or already signed up to a fixed-term energy tariff.
Ofgem has announced an update to the price cap methodology that will now be updated quarterly rather than every six months.
Does the price cap apply to businesses?
No, it doesn’t, only in households. Unfortunately for businesses, there is currently no price cap, and you can see some energy suppliers are passing on the costs to business gas and commercial electricity prices to combat the household price cap.
Here are a few tips to reduce your energy bill as a business.
What will happen to UK energy prices in 2023?
It’s difficult to tell – but judging by recent predictions and analysis by Cornwall insights, it’s safe to say that energy prices will continue to be high throughout 2023.
However, Cornwall Insights show the cost of household energy peaking in Q2 2023; it still stays considerably high throughout 2023, leading into the early stages of 2024.
The reasons for the cost of energy still increasing are:
Why are energy prices still so high?
There are many reasons why energy prices are still skyrocketing. These include the Russian invasion of Ukraine, as this has resulted in economic sanctions against Russia.
Here are the key reasons wholesale prices are still skyrocketing:
- The UK produces >40% of its electricity from natural gas.
- The UK is reliant on importing gas from Europe after using all of its gas reserves.
- Russia cut natural gas to the Nord Stream 1 pipeline.
- The Nord Stream 1 is now running at less than 20% of its standard capacity.
- The weather in the last few years has been less windy than usual, making the country more reliant on generating electricity from gas instead of renewables.
Read our full energy market recap here.
Is there help for households struggling with energy price hikes?
There is help out there. We’ve created a guide that highlights the current government and energy supplier initiatives that can help save you money and contribute to your energy bills.
The full guide can be accessed here.
The guide looks at the following options:
- Receive a one-off payment from the government of £400 applied directly to your energy account.
- Receive £150 if you pay your council tax.
- Fuel vouchers are available.
- The warm home discounts are available to you.
- Energy supplier grants to combat the increasing energy costs.
- Winter fuel payments.
What should I do if my fixed tariff is due to expire?
It depends on what’s on offer to you. Once your fixed tariff expires, your current energy supplier will put you on a variable tariff. The default variable tariff is price capped and may be cheaper than fixing a new tariff.
It’s worth comparing to see what’s out there, but if nothing affordable is available to fix, it’s probably worth staying on the default tariff until a price drops below the price cap.