Fixed price energy contracts

According to new data from Citizens Advice, gas and electricity prices have risen at three times the rate of inflation - which has risen by 10.2% since October last year. And the charity predicts that by January 2014, the big six suppliers will have increased their gas prices by a total of 37% since October 2010 and their electricity prices by 36%.

As a result of the upwards-only trend, Ecomonitor managing director Brian O’Hagan is advising his customers to fix their energy contracts for at least 24 months, and to start looking around for a better deal regardless of how long a contract has to run.

“It’s not just when you purchase your energy that’s important - it’s when your contract starts,” he warns. “You could fix now, for example, even if your contract isn’t due for renewal for another six to 12 months, and could benefit from some competitive prices despite being in a winter period. It is always best to find out what can be achieved.”

Independent retailer David Knight of Knight’s Budgens of Hassocks, West Sussex, has done just this. “Our contract is due for renewal this month. However, we had already started to monitor the market five months ago so that we could fix the price early. This turned out to be very lucky as almost all of the big six energy suppliers raised their prices in November,” he explains.

In other words, it’s important to take into account what period you are buying for, not just when you choose to agree your new contract.

If your agreement is due for renewal within the next three months, you may have little choice in when you choose to agree a new deal, but if it is further away then it’s definitely a good idea to get a good view of what is out there. If you don’t agree a new deal before your old one expires, you may find yourself on a shockingly high rate.

If, however, your agreement is not due for renewal until February 2014 or later, for example, you could still agree a new deal now, ready for it to start next year.

There are some pitfalls to watch out for when fixing a contract, though. Shopping around is important. If your contract is nearing renewal, don’t get pressurised into securing a new one with your current supplier just because they’ve called you.

“Be careful of anyone calling you saying they are ‘calling on behalf of your supplier’,” says O’Hagan. “Take their full name, telephone number and e-mail address first. There are a number of rogue brokers pretending to be suppliers and they may try to sell you a new contract, often at very high rates, and they are very difficult to break free from.”

If you compare prices directly, make sure you are comparing like for like. Some suppliers might not fully fix prices, or may exclude some chargeable elements.

You must also read any contract carefully before signing. You may get a better quote on prices per kWh consumption, but be aware that there may be clauses that allow the supplier to pass on increases in distribution costs and it is always better to ask about this in advance.

So how long should you lock in your energy deal? “If possible I would always look to fix for at least two years,” O’Hagan says. “While your bills will initially be a little higher than if you’d only fixed for one, it’s probably going to be worth it in the long run as energy prices only look set to keep on rising.”

Premier retailer Dan Cock at Whitstone Stores in Holsworthy, Devon, agrees: “These days, fixing for as long as you can is probably the best course of action. Even if your contract is not up for renewal immediately I think it’s always a good idea to keep abreast of what is happening with energy prices and which suppliers are offering what. The suppliers have pledged to be more understanding in their treatment of small businesses going forward. Let’s hope this is the case.”