If, like us, you’re holding out for a fixed energy deal at or around the 1st October 2023 price cap, it’s frustrating that there aren’t any offers yet. We still have our fingers crossed, but if no fixed prices are available at the October price cap by mid-October, then taking a 1-year deal at the current 1 April 2023 price cap or floating with the quarterly price cap are likely the two best options. Let’s explore why.
Winter is often a very volatile time for energy prices and prices can increase very quickly, especially if we get a prolonged sub-zero winter. But more worrying for us at Hugo is the likelihood of Russian gas and oil supplies going into complete shutdown for three months in an attempt to destabilize global energy markets.
Not only is this, in our opinion, a possibility it is quite likely given Russia’s previous behaviour and desire to pile pressure on the US and European economies when they are most vulnerable by weaponising energy prices.
To better understand this risk, we recommend listening to this leading podcast on global energy markets: MacroVoices podcast #394. Especially from 30:00 min onwards. (Also available on Apple Podcasts and Android Podcasts)
The Risk of Tracker and Agile Tariff Rates
Understandably, we have seen a lot of people moving to tracker-type energy deals where you pay a price based on the wholesale price of energy. At various times during the day, charging your EVs or batteries will be cheaper. However, during an energy crisis, when the price of electricity and gas skyrockets, these tariffs are the most exposed to the market.
Suppliers like Octopus cap any increase to 100p for electricity and 30p for gas but this is still x 3.5 more than the current price cap. These types of deals are also not protected by the government’s Energy Price Cap. So, this is not a risk that I personally want to be exposed to this winter. You can read more about Octopus tracker rates here: https://octopus.energy/tracker-faqs/
In Hugo’s TARIFFS section, we currently have a fixed rate deal being offered by So Energy for gas and electricity at or around the 1 April 2023 price cap (7% higher than the 1st October cap). You should also find that your energy supplier is probably happy to offer you a fixed deal in or around the 1st April 2023 price cap as well. If prices do rise over the winter, then even these fixed prices will likely be removed.
Given all the possible scenarios, here are the options as we see it over the coming month:
- Wait until early to mid-October 2023 to see if any further fixed energy deals come to the market that match the 1st October 203 price cap and then fix.
- Fix over the winter now at or around the 1st April 2023 price cap for one year.
- Keep floating at the Energy Price Cap after 1st October 23 and see a 7% drop in your prices, which are protected until the 1st January 2023. The risk is the next price cap could be a big increase due to the global political climate, a very cold winter or other unknown causes.
- Stay on a tracker or agile price and hope that these prices are not exposed to big spikes over the winter.
Sadly, the reality is that none of the choices are particularly attractive. In our opinion, though, the best option this winter is to play defence. So, we would make sure that you have some kind of fixed deal in place that is not exposed to the perils of the coming winter by mid-October. I will wait until mid-October but ideally hope to fix at or around the 1st of October price cap rates.
Written by Ben Dhesi
About me: I am one of the founders and CEO of Hugo Energy App. When working in the commercial energy markets, I won Energy Buyer of the Year in 2015 for wholesale trading of gas and electricity for commercial customers and I also won Energy Buyer of the Year in 2017 for an electricity buying strategy implemented for Nottingham Trams (UK Energy Awards).
I don’t do media or give advice based on any financial incentives. My advice is purely my own. And is based on both how I see the UK energy market and how I’m managing my household energy costs.
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