Fixed tariff or variable tariff: your guide to energy charges

Introduction

With so many different energy tariffs available, it can be tricky to know what’s what. Don’t worry though, we’re going to help you understand the differences between fixed and variable energy tariffs.

You may be wondering which option is better for you. This guide will go through the ins and outs to help you understand. 

What is a fixed energy tariff?

A fixed energy tariff is a long-term agreement between you and your supplier. You will pay the same price for electricity or gas for a set period of time, typically three or five years. Fixed tariffs are more expensive than variable ones, but they do provide security against future price fluctuations in the energy market.

Fixed tariffs are often called ‘fixed rate’ or ‘guaranteed rate’ deals by suppliers because they offer greater certainty about your costs over time. However, this doesn’t mean you won’t see any changes to your bill if conditions change – it just means that these changes will be smaller than normal for that period of time.

What is a variable energy tariff?

A variable energy tariff is a type of energy tariff where you pay different prices depending on the amount of energy you use. The most common variable tariffs are seasonally adjusted and dual-fuel (gas and electricity). Seasonal adjustments mean that your bill will be more expensive in winter than summer because people tend to use more heating during those months. Dual-fuel means that you’ll pay both gas and electricity on one bill.

You may think this sounds like a good idea—after all, if the price of energy goes up then so does your bill! But actually, it can sometimes be a bad deal, especially if there isn’t much difference between what your supplier charges for its variable tariffs compared with its fixed ones. With the current energy price rises, this can mean that those on variable tariffs are at risk of higher rises. 

Are fixed energy tariffs cheaper than variable tariffs?

You might think that fixed tariffs would be cheaper than variable ones. After all, they don’t change with the whims of the market. However, there are two reasons why this isn’t always true:

  • Fixed tariffs cost more to provide
  • The cost of providing fixed tariffs is passed on to customers in the form of higher tariffs

Should I switch to a fixed energy tariff?

  • If you’re on a variable tariff, you can switch to a fixed tariff.
  • If you’re currently on a fixed tariff, you can switch to a variable one.
  • So if you are currently on one of these tariffs and want to change then it’s worth looking into whether switching makes sense for you.

Fixed energy tariffs are more expensive but they provide security against future price fluctuations.

Fixed energy tariffs are more expensive but they provide security against future price fluctuations.

Fixed energy tariffs are fixed for a set period of time, typically 12 or 24 months. If you choose a variable tariff, your supplier will keep your bill down by changing the rate according to changes in the wholesale market. This can be helpful if prices go up – because suppliers will only increase your bill if the wholesale rates have increased – but if prices fall, you’ll have no protection from paying less than you had been used to paying on a fixed deal.

Variable tariffs also give you less certainty about what your monthly payment will look like each month (we talk about how variable tariffs work in more detail here). If you’re happy with this level of risk and uncertainty, then it could make sense for you not to opt for a fixed tariff when paying bills. However, all is not lost as variable tariffs are typically cheaper than fixed ones. 

Conclusion

If you decide that a fixed energy tariff is right for you, there is one more thing to consider. As well as the type of tariff you choose, it’s important to shop around for the best deal. We recommend looking at comparisons on our website! Bright Utilities can offer you the best industry rates when you decide to switch suppliers.

Switching energy providers is the best way to make savings on your bills! Take a look and get a quote today!

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