Fixed Price Energy: Is It the Right Choice for You?

A fixed price energy tariff gives you peace of mind. It locks in your energy prices for a specific time. This helps protect you from possible price hikes in the future. With energy costs going up due to changes in wholesale prices, a fixed tariff can feel like a good deal. But is it really the best energy deal for you?

We will look at the pluses and minuses of fixed energy tariffs. We will also answer important questions, like if it is the cheapest option and what to do when your contract is over.

What Is a Fixed Price Energy Tariff?

A fixed price energy tariff means that the cost of your energy stays the same throughout the contract. This usually lasts between one and four years. The price for each kilowatt hour (kWh) of electricity or gas is set, but the total bill will change based on how much energy you use. This helps you feel secure about costs and protects you from future price hikes in energy.

It’s important to know that not all fees are part of the fixed rate. For instance, the daily standing charge is a set fee that you pay no matter how much energy you use. This charge may not be included in your plan, which could raise your total bill. Moreover, fixed tariffs can sometimes be higher than the best variable tariffs available.

How Long Is a Fixed Price Tariff?

Most fixed energy plans last from one to four years. The time of the plan depends on the energy supplier. You will see how long the plan is when you sign the contract. If you leave the contract early, you might have to pay an exit fee. It's important to look at the length of the contract. Think about whether you need some flexibility before you agree.

How Does a Fixed Price Energy Tariff Compare to a Variable Tariff?

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What is a Variable Tariff?

A variable tariff, also called a standard variable tariff, is an energy plan. In this plan, the price you pay for energy can change with wholesale energy prices. This means your rate can go up or down based on market conditions. A variable tariff can be cheaper when energy prices fall. However, it also means you may face sudden price increases. This can result in paying more than you expected.

Advantages of Fixed Tariffs Over Variable Tariffs

• Price certainty: A fixed deal means that the cost of your energy will stay the same for the whole contract period. This protects you from rising energy prices.
• Stability: You won’t have to stress about sudden spikes in energy prices caused by changes in the wholesale market. This gives you better control over your budget.

Disadvantages of Fixed Tariffs

• Higher starting price: Fixed tariffs often start at a higher price than variable energy tariffs. This is especially true when the energy market is stable. If prices drop, you may end up paying more than you would with a variable energy tariff.
• Exit fees: Many fixed tariffs have fees if you switch before the contract is over. These fees can be between £30 and £75 for each fuel. However, some energy providers might not charge these fees if you are moving to another fixed plan from the same supplier.

What Should I Do When My Fixed Energy Price Contract Ends?

When your fixed-rate contract ends, your energy supplier will usually send you a letter about new plans. If you do not respond, you will likely switch to the supplier's default rate. This default rate is usually a standard variable tariff. These tariffs can be more costly, especially compared to new fixed-rate deals available in the market.

How to Find the Best Deal

When your contract is about to end, use websites like freepricecompare.com to find better deals. You can look at fixed-rate tariffs, variable tariffs, and green energy tariffs. This helps you pick the best rate and may save you money on your bills. Be sure to compare plans that have the same contract length. Also, watch out for any exit fees or hidden costs.

Is a Fixed Tariff the Cheapest Option?

The lowest energy tariff changes based on the market conditions. When wholesale energy prices go up, a fixed rate deal can help you save money. It protects you from any price hikes. But, when prices are going down, a variable tariff might give you better value.

Consider the Following Factors:

• Wholesale prices: Will they go up or down in the next few years? If energy prices are expected to rise, locking in your rate now may help you save money later.
• Unit rates and standing charges: Even if the unit price is secured, check that the daily standing charge is fair and included in the deal.
• Length of the contract: A longer contract can keep your rate steady for some time, while shorter contracts give you more choices if prices drop.
• Energy efficiency: If you have made your home more efficient, like adding solar panels or improving insulation, you may use less energy. This could make variable tariffs a better option for you.

What Happens if Energy Prices Fall?

If you have a fixed tariff and wholesale prices go down, you won't save money. This is a downside of a fixed rate deal. You will keep paying the same fixed unit rate, even if variable tariffs become cheaper. Some people pick flexible tariffs because they can make the most of falling prices.

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Can I Switch Energy Suppliers on a Fixed Tariff?

Yes, you can change suppliers even if you have a fixed energy tariff. However, if you switch before your contract ends, you will probably have to pay early exit fees. These fees are usually mentioned when you sign the contract, and they can be different based on your supplier and the terms of your contract.

To skip these fees, you can wait until your contract is over. A lot of suppliers let you change without a fee up to 49 days before your contract ends. This is known as the renewal window. Use this time to find better deals and switch energy providers without paying any extra charges.

Why Do Fixed Tariffs Come with Exit Fees?

Fixed tariffs usually have exit fees. These fees stop customers from leaving the contract too soon. Energy suppliers want to feel sure they will get their money back for the energy they bought for your contract. That is why they charge fees when customers switch early. Although the fees might feel like a bad thing, they allow suppliers to give good rates on longer fixed plans.

How to Get the Best Deal on Fixed Price Energy?

To get the best fixed energy deal, you can follow these steps:

• Compare prices online: Use sites like freepricecompare.com to check rates from different suppliers. Look at unit rates, standing charges, and how long contracts last.
• Look for promotions: Some suppliers give discounts or cash back if you switch. Always see if there are any offers available.
• Consider your energy usage: If your home uses a lot of energy, a fixed tariff may protect you from rising prices. If your usage changes often, a variable tariff might save you money.
• Set a reminder for your contract end date: Don’t forget to switch before your contract ends to avoid extra fees.

FAQ’s on Fixed Price Energy