Energy giants launch deals beating October price cap

Households could save more than £100 on their energy bills by changing suppliers after three suppliers launched deals undercutting October’s rising price cap.

From next month, a typical home will pay £1,717 per year for their gas and electricity when the cap – set by the regulator Ofgem – increases from its current rate of £1,568.

But British Gas, EOn Next and Outfox The Market have each launched one-year fixed-rate tariffs promising to beat this sum by up to £117.

The new deals will no doubt spark the return of energy switching whereby households shop around between suppliers for the cheapest tariffs. It was historically the best way to save money on bills but the practice died out at the start of the energy crisis in 2021 when dozens of suppliers went bust and low-cost deals vanished from the market.

Today, the cheapest one-year tariff available is the Outfox the Price Cap (Oct 24) Fix’d Dual v1.0 deal. A household switching on to this fix would pay £1,600 on average over the year.

EOn Next’s Gust 12m v11/Next Fixed 12m v26 deal is the second best at £1,626, which is £91 cheaper than the price cap.

Meanwhile, the British Gas Fixed Tariff 12M v15 beats the cap by £90 at £1,627.

Ofgem’s price cap regulates the maximum amount companies can charge customers on variable-rate tariffs.

Prior to the onset of the energy crisis, households could undercut the cap by opting for a fixed-rate tariff which guarantees they only pay the advertised rate over an agreed period of time. Bills still vary depending on their energy usage but the rate they pay remains the same.

However, the majority of fixed-rate deals were wiped from the market by soaring wholesale costs in late 2021, sparked by Russia’s invasion of Ukraine.

It left households stuck on variable-rate tariffs meaning the amount they pay for energy fluctuates in line with wholesale costs. It also left them more exposed to changes in the price cap.

Experts said the latest deals show competition is slowly returning to the market.

Ben Gallizzi, of comparison service Uswitch, said: “Millions of households will see their energy prices rise from October, so now is a good time to look around.”

Tom Lyon, of price comparison website Compare the Market, said: “If households are concerned about the potential energy bills increase, they could consider locking in a one-year fixed-rate deal now. Fixed-rate tariffs can work out cheaper than standard variable tariffs and you’ll be protected from any future price hikes when the oil and gas markets are volatile.”

The October price cap will still be 6pc lower than last year when it was £1,834. However many households will be worse off due to the loss of government support and winter fuel payments.

The Government has withdrawn a £400 energy bills discount launched in 2022 to offset households’ rising bills. And 10 million pensioners will be up to £300 worse off because of the removal of winter fuel payments.

From winter 2024, only pensioners who get pension credit and other means-tested benefits will be eligible for the support after Chancellor Rachel Reeves’s drastic cuts.

Energy market data provider Cornwall Insight predicts there will be another slight increase to the price cap in January 2025.