How do 2-year fixed energy deals work?
A fixed energy deal, also known as a fixed tariff, fixed-rate deal or fixed plan, means that the unit price and standing charges you pay for gas and electricity are "locked in" for a fixed amount of time.
Fixed deals most commonly last for 12 months, but some suppliers will offer longer-term deals, up to 24 months.
What are the benefits of choosing 2-year tariffs?
There are 3 key reasons to consider signing-up to a 24-month fixed energy tariff:
- Helps you budget in advance
- Beat potential price hikes
- Avoid potentially very expensive variable rates
Signing-up for a 2-year energy deal provides stability and peace of mind that the rates you're paying for your energy each month will be the same. Even if the price of energy goes up in the wholesale market, your deal will not be affected, allowing you to more effectively budget your household expenses.
If you are not on a fixed deal, you will be on your supplier's standard variable tariff (SVT), meaning that what you pay for your gas and electricity can go up or down at any time, depending on wholesale energy prices.
Should I fix my energy prices for 2 years?
Currently, the energy deals on offer are only available for 12 months. However, when 24-month deals are available, suppliers will generally charge more.
By signing up for a longer deal you are also gambling that energy prices will be higher in 12 months than they are now. If you sign up for a 24-month fixed deal, while you won’t be hit by any surprise price jumps, you will be left overpaying if market prices drop.
Additionally, you should only consider a 24-month tariff if you are sure that you’ll be staying at the same address for two years. Although some suppliers will be able to transfer your existing deal to your new address, others - such as SSE or OVO Energy - will not be able to transfer your deal to a new property, as their rates are location-based. If you cannot transfer your deal to your new home, you risk incurring exit fees.
Why do energy suppliers charge more for a 2-year fixed deal?
Generally speaking, 2-year fixed deals are more expensive generally more expensive because the forward curve in wholesale energy markets.
Energy suppliers use a forward curve when providing its customers quotes for gas and electricity deals. For a 2-year fixed deal, the purchase of gas and electricity by your supplier is based on the supplier's view of the market cost of that energy supply at different points of time in the future. The forward curve is an indication of what it will cost your supplier to commit to a fixed purchase on your behalf.
Although energy suppliers can hedge their prices by buying a year or two in advance, they cannot predict what is going to happen in one year, let alone two. For this reason, energy suppliers will often demand a premium on a 2-year fixed deal to help cover the risk.
Which suppliers offer 2-year fixed energy deals?
Under normal circumstances, most energy suppliers will offer 24-month fixed energy deals. However, due to the recent volatility in the market, suppliers offering more deals longer than 12 months are rare.
What are the best 2-year fixed energy plans?
The best 2-year energy deals are constantly changing, so it's always worth running a price comparison before signing-up to a new contract.
You should also check the price difference between the 12 month and 24-month tariffs, so you know how much extra you are paying for the benefit of longer-term security.
Compare gas and electricity deals
We monitor the market and automatically switch you to better deals for free.