Ofgem’s announcement of a lower energy price cap was soon followed by advice to be wary of fixed tariffs from suppliers, which analysts tip will re-emerge in coming months.
“Prices are still unpredictable and signing up for a fixed rate now might mean you miss out if prices fall,” Ofgem tweeted, after announcing its price cap would drop to £2,074 in July.
Despite the regulator’s advice, Ofgem boss Jonathan Brearley was among those warning prices were unlikely to dip significantly anytime soon.
⚠️THINK BEFORE YOU FIX
With the lower #PriceCap figure, fixed-rate energy tariffs might appear back on the market, but check if they are right for you
Prices are still unpredictable & signing up for a fixed rate now might mean you miss out if prices fall pic.twitter.com/hhjuPLM7HY
— Ofgem (@ofgem) May 25, 2023
“In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis,” he commented on the news that consumer bills would drop for the first time since early 2021.
Think tank the Energy & Climate Intelligence Unit went a step further, predicting household bills would not fall below £1,700 this decade, a 50% hike on pre-energy crisis levels.
As prices fall into October and rise again in winter, Hargreaves Lansdown's forecast that increased certainty may see fixed-rate deals become more common among suppliers.
This would mark “a much-needed return of decent competition in the energy market,” interactive investor analyst Myron Jobson said after many suppliers paused offering fixed rates due to volatile gas prices on the back of the pandemic and war in Ukraine.
MoneySavingExpert analysts agreed, explaining that “short-term certainty” may tempt suppliers to offer better deals.
Certainty from fixed rates, which offer consumers a set price for energy over differing time periods, will likely be a key selling point, analysts suggested, given the rapid price hikes that led to Ofgem's cap topping £4,279 between January and March.
“Based on current predictions, if any firm offers a fix for not much more than the July price cap, for the sake of certainty it's worth considering,” Martin Lewis’s team advised.
“It’s worth keeping an eye out for fixed rates,” Hargreaves Lansdown finance head Sarah Coles added.
“If you find something affordable, it may be an opportunity to get a bit more certainty about your bills.”