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Britain’s largest energy supplier now offers fixed-rate deals to new customers.
The fixed rates launched by British Gas mark the first time households can fix with a major supplier they are not already a customer of since the energy crisis saw deals vanish from the market.
Experts have been predicting the return of fixed rates for months, as the Government’s freeze on energy bills is replaced by the regulator-set energy price cap.
Since September last year, the Energy Price Guarantee has kept typical household bills at £2,500 a year.
But the guarantee was removed this month because the pre-existing energy price cap, which is governed by watchdog Ofgem, is now below the guarantee.
Under the current price cap, a typical household now pays £2,074 a year.
How do you know if fixing a deal today will be the right decision?
The short answer is that you won’t.
But the chart below shows how a typical household’s bills are forecast to change over the course of the year, using predictions from analysts Cornwall Insight.
The cap is adjusted every three months to reflect developments in the wholesale market.
Cornwall Insight predicts the cap will fall to £1,878 in October, and rise to £1,917 in January 2024, before falling again to £1,888 in April.
The rapidly changing nature of the energy market makes these predictions less reliable the more forward-looking they are.
For households anxious about unforeseen spikes in energy costs, a fix will protect them from shocks in the wholesale market for the duration of the fix.
But such security comes with a price: most fixed deals on offer are marginally more expensive than the predictions for the price cap, which only applies to variable rates.
Should you buy the British Gas deal?
British Gas offers two fixed deals, one for new and one for existing customers.
Both are fractionally higher than variable rates – priced at £2,099 a year on average (regional variances apply). Neither deal is available if you do not have a smart meter.
The deals also come with hefty exit fees of £200, meaning if prices fall more than expected you will miss out.
Only one other provider – So Energy – offers fixes to new customers.
However, So Energy, which provides 100pc renewable electricity to customers, is a far smaller supplier with around 300,000 customers. The company was set up in 2015 and merged with ESB Energy in 2021.
Other providers already offering fixed deals only do so to existing customers.
Ovo, Octopus, and EDF’s deals are all priced 1pc above the price cap.
The outlier in all this is Utility Warehouse: the supplier’s one-year fix is, on average, 5pc cheaper than the price cap.
However, in order to sign onto it customers must also switch to two of the provider’s other products – either broadband, mobile, or boiler cover.
None of these are the cheapest deals on the market, which can wipe out savings made by the cheaper energy bill.
Utility Warehouse’s broadband deal, for example, is £24 a month for 35Mb and £31 for 63Mb (the cheapest broadband deals can be as low as £18 a month).
The deal lasts for 18 months, meaning it will outlast the energy deal. Campaigners have been wary of such package deals.
Simon Francis, of the End Fuel Poverty Coalition campaign group, said: “We’re not convinced that these are offering particularly great deals for customers.”