Fixed-rate energy customers advised to stay put

Most consumers who have opted for a fixed-rate energy tariff are better off sticking with their deal than switching to a variable rate, despite recent gas and electricity price cuts. The 'big six' energy suppliers recently announced they will cut prices for those on variable tariffs by an average of £34, or 2.6% a year. But product comparison website uSwitch says people on fixed price plans are still benefitting from cheaper bills than if they were on a standard variable tariff. Tom Lyon, energy expert at uSwitch, said: "As a result of the £224 or 21% hike in prices that started at the end of 2010, consumers flocked to fixed price plans. Now with energy prices falling some will be wondering whether they did the right thing." However, Lyon said that even after the most recent cuts prices would still need to fall by £170 or 13.5% before those on fixed-rate deals would be out of pocket compared with standard plan customers. Even though the cost of fixed tariffs has risen since summer 2011, Lyon said they account for four out of eight current best buys. Mark Todd, director of Energyhelpline , said: "Those on fixed tariffs will miss out on the recent cuts, but they are still massively quids in because these deals are still much, much cheaper than the standard ones offered by the big six providers even after the price cut." However, the cheapest variable rate online plan would cost the average energy consumer £1,030 a year – £29 less than the cheapest plan fixed until March 2013. This means consumers need to weigh up longer-term security against the potential for further price cuts, Lyon said: "The fixed price plan will not benefit from price cuts, while the online plan potentially could – although there are no guarantees. What the fixed price plan will do, though, is protect you against price rises in the medium to long term, so consumers need to consider how important this price security is to them." Normally, consumers wanting to switch out of a fixed-rate deal early would have to pay exit penalties. British Gas charges £50 each for switching out of gas and electricity price fixes, while M&S Energy charges up to £75 and EDF up to £70. These charges can easily wipe out the benefit of switching to a cheaper deal. But nPower and E.ON have said they will waive exit penalties for a period of time for existing fixed-rate customers, leaving them free to move on if their deal becomes uncompetitive. Co-operative Energy has called on the rest of the big six – British Gas, SSE, EDF and Scottish Power – to follow suit and allow consumers to benefit from cheaper prices. The Co-op has also promised to pay the exit penalties for the first 10,000 customers who want to switch to its single variable tariff, crediting the customer's first bill about three months after joining. It charges the average customer £1,144 a year. Todd said some people, particularly those on expensive British Gas and SSE fixed-rate deals, could benefit from this offer. But for those not tied by penalties the online variable and fixed-rate deals from First Utility are much cheaper, charging £1,030 a year for the online version and £1,060 for the deal fixed until May 2013. And there is good news even for those who switched to EDF's three-year fixed deal, which costs the average customer £1,084 a year. "It is a good long-term option," Todd said. "It is still cheaper than the Co-op tariff and although prices are only likely to go down this year, who knows what will happen in 2013?" Check out whether you could benefit from switching via the Guardian's gas and electricity pricing service .