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Do gas price cuts mean you shouldn't fix your energy?

Energy companies are cutting their gas prices, but does that mean you should hold off getting a fixed price tariff?

After coming under pressure for not dropping gas prices in line with falling wholesale costs, each of the big six energy suppliers has finally reduced their rates, with EDF today joining the other five big providers in lowering what they charge.

But do these cuts mean it’s worth staying on a variable energy tariff, or should you consider switching to one of the cheap fixed price deals available? 

What is a fixed price energy tariff?

There are two types of energy plans.

A fixed price tariff will freeze your energy rates for the duration of the contract. For example, if you sign up to a 12 month deal with an energy supplier, you agree to pay a certain rate per unit of energy consumed during that time.

This does not mean that your bills will stay the same no matter how much energy you use. The per unit rate is fixed, so if you turn the heating down, this will be reflected in your bill.

The alternative to a fixed price plan is a variable tariff where the price per unit can change. This means you are affected by price rises, but also price drops. The reduction in gas costs, for example, will only affect those on variable tariffs.

So should I switch to fixed price plan?

According to energy regulator Ofgem, many customers on variable energy tariffs would save close to £250 per year, simply by switching to a fixed price deal.

For the average consumer - using 3,200 kWh of electricity and 13,500 kWh of gas and paying by direct debit - short-term fixed plans are currently cheaper than many variable tariffs. However, should you decide to switch provider before the end of your contract, you may be required to pay an early exit fee, so keep this in mind when making a decision.

Remember every home has different consumption patterns and circumstances, so run a price comparison to make sure you’re on the best plan for you.

The big six’s price cuts to date

If you only use electricity then this round of cuts won’t affect you as it's just the price of gas that has changed.

E.ON was the first of the big six to reduce gas costs and its average 3.5% reduction came into effect on 13 January. Next up is EDF Energy, which will decrease gas costs by 1.3% on 11 February, npower, which is planning to drop prices by 5.1% on 16 February, followed by ScottishPower, which will cut gas prices by 4.8% on 20 February.

The UK’s largest energy supplier, British Gas, will drop gas prices by 5% on 27 February, and finally SSE will implement a 4.1% drop on 30 April.

What do you think?

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  • Colin Gleave / 2 February 2015

    I see that SSE are only cutting their prices after the winter has finished, they are getting their moneys worth out of their cutomers so profits again will be up

  • Robert Powell / 1 February 2015

    I think the big 6 will have to drop electricity prices soon. They are being undercut by first utility.