Energy companies seem to be making a move towards fixed energy tariffs to allow cheaper options for consumers.
However, Money Saving Expert Martin Lewis has warned that it might not be as good as it seems on the surface. OVO recently announced a new energy tariff of a one-year fixed rate of £2,275 based on typical dual-fuel use.
This makes it £225 cheaper than the government's Energy Price Guarantee which is capped at £2,500 until July. While it is the first new tariff of its kind to enter the market since last year, Mr Lewis has advised customers to think carefully about their options before they sign up.
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Speaking on his podcast, Mr Lewis said: "There is currently only one fix available on the market, it's from OVO, it's only for existing customers unless you go and were already signed up to the email from Moneysupermarket before it launched this which is about 200,000 people and then new customers can get it too. But you can't join that unless you were in advance so this isn't a recommendation for that, it just means that if you have the facility you have more choice even if you're not an OVO customer.
"So, to explain this, the most important way I can do that is to talk to you about what's going to happen to energy prices if you don't fix. And what we know and what we don't know and what we predict so far."
He added: "So, what we now know is the energy price guarantee won't rise in April - that was cancelled in the Budget - so prices are going to remain roughly as they are now until July which is when the following price cap mechanism comes into place. Now there will be slight moves - the standing charges going up a bit, the unit rates going down a tiny bit but on average the prices will remain the same.
"Of course, you lose the £66-£67 winter bill support in April, but I am talking about the rates you pay as opposed to that which was a direct supplement on top. In practice everyone will pay more, but I'm talking about the rates here."
He added that current predictions for July state that prices will drop 20 per cent. However, he highlighted that predictions are not set in stone and can change depending on a wide array of variable such as the war in Ukraine affecting wholesale gas prices.
Talking about OVO's new tariff, he said: "Now lets look at the only current fix on the market which is OVO. It is 8 per cent cheaper than we are currently paying so if you switch to OVO it's 8 per cent cheaper but there are hefty exit fees if you decide to leave it - £150 per fuel.
"So, what does that mean? Now personally if you look...if the predictions I say were to be right and of course they're predictions so we don't know that they're right and they could definitely be wrong, things could change then you would actually want to be looking once you factor in seasonal adjustments at a fixed at 18 per cent cheaper than current."
He added: "And the OVO fix we're being offered is 8 per cent. Now you do have to factor in some value to price certainty. A fix gives you certainty - you can budget what you're going to pay.
"And I think therefore if there were a fix at around 13-14 per cent cheaper than right now to get that price certainty, it would be tempting. But for me, 8 per cent isn't enough to lock in, I think we will see cheaper fixes, I don't yet know whether they will be existing customer only or available to the whole of the market."
He continued: "But I am certainly hearing more fixes are coming out and personally, I wouldn't be fixing at 8 per cent cheaper than right now.
"But, if you are very very risk-averse and you want to know what you're going to pay and you want to avoid the risk of energy bills ballooning up again, although I should note that because we have the energy price guarantee in price until April 2024, the highest they could raise is 20 per cent above where we are right.
"So that's the maximum they could possibly go to. But if you want to avoid that then you might decide 'you know what I'm going to take the fix while it's being offered everything else is a prediction we don't know yet what's going to happen and I want certainty' and if certainty is what you value, I certainly wouldn't call you names for going for that fix, personally I don't think it's quite cheap enough to go for at the moment."
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