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Should I Fix My Energy Prices Until 2025?

In 2023, we’ve witnessed a consistent decline in wholesale gas and electricity prices following the record highs experienced earlier in the year. In April 2022, the Energy Bill Discount Scheme (EBDS) was launched by the UK government, superseding the previous Energy Bill Relief Scheme (EBRS). This new scheme aims to provide reduced-level support for businesses and other non-domestic customers. This development has prompted many consumers to contemplate the value of securing a fixed business or domestic energy deal for 2025.

Our recommendation is affirmative – if a better deal is available, it’s advisable to opt for a fixed energy tariff. Despite the decline in wholesale market prices, they remain significantly higher than those in 2021 and are anticipated to rise in 2025. The persisting challenges in energy security contribute to the volatility of the wholesale energy market, where prices can fluctuate daily. By fixing the amount of money you pay, you can safeguard yourself or your business against potential future price hikes.

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Should I fix my energy prices

Why are energy prices so high?

Throughout 2023, wholesale energy prices have experienced a decline, providing some relief to households and businesses across the UK. However, it’s essential to acknowledge that they remain higher than pre-energy crisis levels. Let’s review the key factors contributing to this increase:

  • The incursion of Ukraine by Russia led Germany to suspend the transit of gas via the Nord Stream 2 pipeline. This pipeline, designed to double the annual capacity of Nord Stream 1 from 55 billion cubic meters (BCM) to 110 BCM, was impacted significantly.
  • Russia took further measures by reducing the capacity of the Nord Stream 1 pipeline to 20% before completely ceasing the supply. Considering that Russia typically provides about 40% of Europe’s natural gas, this had a substantial impact.
  • Recent updates confirm that this is when all reforms will start. All TNUoS charges will increase.
  • Europe faced an exceptionally harsh winter, with freezing conditions in northern and central Europe. This led to a surge in gas usage and depletion of natural gas storage supplies.

Is securing a fixed energy contract the best option for you?

We anticipate a continued increase in energy prices! We recommend that all enterprises and homes secure their energy rates until 2025 to avoid unforeseen price surges – provided you can locate a superior offer for your company or obtain a fixed deal below the existing domestic energy price limit of £1,834 annually for the typical UK household using Direct Debit, established by Ofgem on October 1, 2023. Yet, there are several other reasons to consider, regardless of whether you’re a home or business owner.

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Household Consumers

Securing a cheaper energy deal

For households, several energy suppliers are presenting fixed deals that surpass the existing Ofgem energy price cap, aiming to reduce the gap from a standard variable tariff. If you come across such an option, we recommend you opt for it.

Protect yourself

Lock in a fixed tariff for peace of mind, ensuring a consistent energy rate amid uncertain times. This fixed deal will enable you to budget effectively for the upcoming year, providing clarity on your energy costs.

 

Business Consumers

One-year tariffs

The main drawback of opting for a fixed-rate tariff is the risk of committing to the same energy rate until the contract ends. This may cause you to overlook potential reductions in energy prices when wholesale rates decrease, leading to higher overall costs.

Nevertheless, certain energy providers now offer one-year fixed energy tariffs. This option helps navigate the uncertainties of 2025, shielding your business from potential price hikes without requiring a long-term commitment.

Peace of mind

Given our expectation of ongoing volatility in energy prices, opting for a fixed tariff provides a measure of certainty when budgeting for your business’s operational expenses.

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What support is available?

Several energy schemes are accessible to both businesses and domestic customers to alleviate the impact of increasing energy costs. It’s essential to note that each scheme comes with its eligibility criteria, and certain opportunities may have limited availability before closure. For companies, the primary options include:

Power Bill Reduction Program

The government will provide a reduction on your gas and electricity bills if you qualify for the Power Bill Reduction Program. Eligible commercial users will get a per-unit reduction on their energy bills for the 12-month period from April 2023 to March 2025, up to a certain discount limit. The relative discount will be implemented when wholesale prices exceed a specific threshold.

For the majority of non-domestic energy users in Great Britain and Northern Ireland, the maximum discounts are as follows:

  • Electric Rates: Reductions up to £19.61 per megawatt-hour (MWh) when bulk prices exceed £302 per MWh.
  • Gas Prices: Discounts of up to £6.97 per MWh when wholesale prices exceed £107 per MWh.

No discount is applied if wholesale prices remain below the specified threshold.

Government Grants for Energy Efficiency in Business

Numerous government-backed initiatives provide grants, loans, and subsidies to assist smaller businesses in enhancing their environmental impact. Additionally, certain local councils offer funding for energy efficiency measures or grants to support sustainable business growth.

Typically, the application process involves presenting a business case detailing the project or measure you intend to implement. A comprehensive list of currently available schemes can be found on the government’s Finance and Support for Your Business page.

Energy Supplier Energy Grants

Support for energy efficiency is not solely restricted to government programs. Your energy supplier might also provide grants specifically for businesses. To ascertain whether your supplier has any ongoing schemes or offers support to existing customers, the most effective approach is to reach out to them directly. And for domestic customers:

Energy Price Guarantee

The Energy Price Guarantee for residential customers mirrors the existing energy price cap, safeguarding customers by setting a cap on the per-unit charge for energy usage by suppliers. Presently, it reduces the typical dual-fuel gas and electricity costs for a household in Great Britain to approximately £3,000 per year.

Steps to take when your fixed tariff is about to expire

Upon the expiration of your current contract, your energy provider is likely to transfer you to a variable tariff. Depending on prevailing market prices, this switch could potentially be a more cost-effective option for your business, as the default variable tariff is capped.

It is crucial to conduct a market comparison when your contract is up for renewal to explore the available options for your business. Should prices continue to be high, our advice is to stay with the standard rate until they drop beneath the energy price limit.

Our team of energy experts is ready to assist your business in thoroughly exploring the market to identify the best energy rates for you. Reach out today to compare business gas and business electric rates with Business Energy Comparison.

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