With
energy prices set to fall, anyone who locked into a fixed rate tariff recently could be wasting over £500 a year.
Fixed rate tariffs proved extremely popular in 2008 as customers sought to protect themselves against the repeated hikes which saw prices increase by almost £400.
However, wholesale energy prices have been falling since last summer and energy suppliers are finally starting to pass these savings on - something those on fixed deals will miss out on.
Difference will eventually be huge
Admittedly these initial price cuts – due in the coming weeks – will only be in the region of 5% (£70), but suppliers will almost certainly come under pressure to announce further reductions in the summer, given that wholesale prices have fallen by almost 70% since their peak.
According to data from price comparison site uSwitch, a fall of 20% will mean someone on the most expensive fixed rate deal will be paying £530 more per year than someone on the
cheapest online deal.
As you can imagine, energy suppliers make massive profits from fixed rate deals and as a result some have been
aggressively marketing these deals in recent months in order to snare as many customers as possible before the price cuts.
Might be worth paying the exit fee
The bad news for those who signed up to such a deal is that they will have to pay a hefty exit fee of between £50 and £75 before they can
switch to a cheaper tariff.
But as the table below shows, this is almost certainly worth paying – especially if you are with British Gas – as you'll still end up almost £300 better off.
However, for those who signed up to a fixed deal a year ago, the benefits of switching will be far smaller, because such deals were up to £200 cheaper than today.
So whether or not you should take the exit penalty hit will depend on which tariff you are presently on.
Tips for securing a cheaper deal
If you are looking for a cheaper deal, it is always a good idea to pay by direct debit and opt for the
online tariff, which can be up to 15% cheaper than standard ones.
The only difference you'll notice is that your account will be managed online.
Insulation is another handy cost saving initiative. The cost of fitting loft or wall insulation has not increased dramatically in recent years, but the sky-rocketing cost of energy means the potential savings have.
Benefits of ditching fixed deal for online plan
|
Fixed deals on 1st Jan 2009
|
Price
|
Exit fee
|
Saving (after fee)
|
|
British Gas Fixed Price 2012*
|
£1,428
|
£70
|
£299
|
|
EDF Energy Price Protection 2010
|
£1,291
|
£75
|
£157
|
|
E.ON Energy Saver v7
|
£1,247
|
£60
|
£128
|
|
EDF Energy Price Protection 2009
|
£1,229
|
£50
|
£120
|
|
ScottishPower Capped Price Energy online
|
£1,218
|
£50
|
£109
|
|
EDF Energy Price Freeze 2009
|
£1,169
|
£50
|
£60
|
|
ScottishPower PriceSure
|
£1,114
|
£50
|
£5
|
