Energy tariffs explained

Our energy tariffs guide explains some of the popular ones in the market.

What are fixed energy price deals?

Put simply, a fixed energy plan allows you to lock in your energy tariffs for a defined amount of time. This can be a good thing, as it can protect you from potential price rises in the cost of a supplier’s energy. There’s an element of gambling involved, though – if prices should fall during your contract’s term, you might have made more savings with a variable rate deal.

Note it’s the cost of each kWh (kilowatt hour) that remains fixed – a fixed tariff doesn’t mean your monthly bill or Direct Debit will be identical, because you are always charged per amount of energy consumed. Most people see greater costs to cover January’s energy usage than they would July’s, for example.

The amount of money you pay monthly is calculated by your provider based on the amount of energy you are expected to use. But if you’re regularly using more or less energy than they calculated, they may suggest a corresponding rise or fall in your monthly payment.

What are variable energy price deals?

Variable rate tariffs are also called ‘standard’ tariffs, because they often reflect a supplier’s default plan. If you signed up for a particular deal which has now ended, and you’ve not switched or chosen a new tariff, this is most likely the plan you’re on.

Signing up to a variable rate plan means that the prices you pay for your energy could rise at any point. As energy providers face increased costs from various government-mandated efficiency, environmental and investment initiatives, prices set to rise significantly in the next few years. Taking a variable rate plan is a risk – perhaps a greater one than gambling on a fixed plan. However you won’t be charged to leave your variable plan, so it offers some freedom compared to fixed plans which often come with penalty fees for early cancellation (although usually to a tune of only £30).

Should I fix my energy prices?

Both fixed and variable deals have their own benefits, depending on your circumstances and needs. In general, it’s better to fix prices. Fixed rate deals protect from price rises and offer security. Knowing your energy costs over a longer timeframe can help you to manage money and budget more easily. They often work out cheaper than standard variable rate packages, too. For all these reasons their popularity has increased in recent times.

You can look for a deal that fixes for a longer period of time if you want extra security, but be sure to note any exit fees the tariff may carry.

Think fixing costs is the right move for you? See our fixed and variable rate tariffs or

 

 

What types of energy tariffs are there?

Beyond variable and fixed rate tariffs there’s a world of different options, often falling under a variety of names depending on the supplier. However, they’ll all typically fall under the following sub-types:

Capped tariff – Your energy price is capped at an agreed amount, never going beyond the set maximum. You will be protected from big price increases, but it likely won’t be the cheapest plan around and an early cancellation fee is sure to be associated.

Dual fuel tariff – You pay for both electricity and gas via a single supplier. Usually a supplier will offer a good discount for receiving double your custom, but you’ll want to absolutely ensure you couldn’t get a cheaper deal by taking two separate tariffs.

Online tariff – You are limited to online, computer-based account management. These tend to provide a cheerfully cheap option. However, it’s not for you if you prefer to file your paper bills or to deal with customer service operatives directly.

Economy 7/Economy 10 tariff – A good choice for those with reliable patterns in behaviour and energy consumption. Energy costs will be reduced during defined ‘off peak’ hours, usually for 7 or 10 per day. Economy 7 typically counts off peak as between midnight and 7, while Economy 10 spreads more evenly across set times. If responsible and vigilant, you can save money this way, but ‘peak’ hours will likely be charged at a higher rate.

Pre-payment tariff – You pay for energy in advance, before you can use it. Often the most expensive way to pay for energy, also requiring a pre-payment meter and one of various payment methods. It does, however, give you complete control over your energy spend, much like a pay-as-you-go phone.

Green tariff — The responsible choice for those with environmental concerns, usually at a very slight increase in cost. Typically it involves adding renewable energy into the mix – funding its use in the community, or supplying energy through partial or fully renewable means.