Ofgem issues warning over fixed energy tariffs

Ofgem has warned consumers to “think” before they fix their energy tariffs, with fears they may be locked into higher prices for longer.

The energy regulator’s deputy director for price cap has said that despite predictions the next tariff cap will be lower than the current £3,280 level, future cap levels “remain uncertain”.

Speaking to Utility Week, Dan Norton said: “It’s good news that we’re seeing some choice returning to the market – but consumers should always make sure they’re making decisions based on their priorities and understanding that energy prices may rise or fall over the lifetime of any deal. Right now, we anticipate the next price cap will be lower, but future price cap levels remain uncertain.

“We know that some customers really value certainty and stability in what they pay for their energy – but everyone should be aware that if prices fall, customers on fixed deals may be locked into higher prices for longer. Customers should make up their own minds based on what matters most for them, and we expect suppliers to help explain the situation when offering these products.”

⚠️THINK BEFORE YOU FIX

Fixed-rate energy tariffs might be appearing back on the market but check if they are right for you

Prices are still unpredictable and signing up for a fixed rate now might mean you miss out if prices fall

Helping you be #EnergyAware pic.twitter.com/iO1MvDdadA

— Ofgem (@ofgem) May 9, 2023

Earlier this year Investec analyst Martin Young predicted that falling wholesale costs will result in a sub-£2,000 price cap in July, but prices are “still considerably higher than historic levels”.

Young said the forecast marks the first time since December 2021 that his company has predicted a cap below £2,000 and that switching could return this summer, albeit focused on customer service/ innovation rather than price.

Yet despite the better forecasts, industry experts have been sceptical of competition returning to the market.

Speaking at UW Customer Summit earlier this year, So Energy executive director Charlie Davies warned energy retailers must not return to a “fight for the lowest tariff”.

He said instead of offering customers basement prices, retailers must ensure that they are generating enough money to reinvest in research and development.

“We all felt at the time, and we can all say with certainty now, that the way the market was before [the energy crisis] was unsustainable,” Davies said. “No one wants it to get back there.”