Fixed vs Variable Electricity Tariffs: Which Saves You More?

Choosing the right energy tariff can save money for your home. It can also bring peace of mind during difficult times. There are two main types of energy tariffs: fixed tariffs and variable tariffs. Each type has its own benefits and downsides.

What Is a Fixed Tariff?

A fixed tariff means you have a fixed price for each unit of energy (kWh) while your contract lasts. This means you will pay the same for gas and electricity, even if energy prices change in the market.

Key Features of Fixed Tariffs:

• Price certainty: The cost for your unit stays the same during the contract.
• Fixed plan duration: Contracts usually last for 12, 18, or 24 months.
• Exit fees: If you cancel a fixed energy deal early, you may have to pay an exit fee. This fee is often between £30 and £50 for each fuel.

Who Should Consider Fixed Tariffs?

A fixed rate tariff is a smart option if you want to feel secure from rising prices. This kind of plan helps families manage their energy costs. It is very helpful if you are moving into a new home.

What Is a Variable Tariff?

A variable tariff means the cost you pay for each unit of energy and your fixed standing charge can change. These changes are based on the wholesale cost of energy. The rates can rise or fall, but the Ofgem energy price cap keeps a limit on how high they can reach for homes with standard variable tariffs (SVTs).

Key Features of Variable Tariffs:

• Rate flexibility: Your energy rates may go up or down due to the market.
• No exit fees: You can switch suppliers or plans at any time without extra costs.
• Price cap protection: The energy price cap puts a limit on the maximum amount suppliers can charge for each unit of gas and electricity.

Who Should Consider Variable Tariffs?

If you want flexibility and can manage some surprises, a variable energy tariff may be good for you. Families who want to pay less or find better deals often choose variable tariffs.

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Fixed vs Variable Tariffs: Key Differences

Here is a straightforward look at fixed and variable tariffs to help you choose:

How the Energy Price Cap Affects Variable Tariffs

The energy price cap is set by Ofgem. It decides how much suppliers can charge for each unit of energy on standard variable tariffs. This price cap is updated every three months to reflect changes in energy costs.

• Current Rates (January to March 2025):
  • Electricity: 24.86p for each kWh, plus a daily standing charge of 60.97p.
  • Gas: 6.43p for each kWh, plus a daily standing charge of 31.65p.
• If you use a prepayment meter, your rates will be a bit higher due to extra costs.

The cap helps families with SVTs keep prices from going up too much. It also lets prices drop when the market permits.

Fixed vs Variable Tariffs: Pros and Cons

Fixed Tariff Pros:

• You will find out the price for the entire length of the contract.
• It shields you from rising energy costs.
• It is good for managing your budget and monitoring your energy bills.

Fixed Tariff Cons:

• You will pay fees if you cancel the contract early.
• You won’t benefit if energy prices go down.

Variable Tariff Pros:

• You can change to a better deal without any fees.
• This is helpful when energy prices go down.

Variable Tariff Cons:

• Energy costs can increase if market prices go up.
• Monthly energy bills might become harder to predict.

Tips to Choose the Best Tariff for Your Home

To find the right type of tariff, follow these steps.

1. Check your energy use: Use a smart meter or send regular meter readings to know how you use energy.
2. Look at prices: Compare the unit price, standing charge, and contract type for fixed and variable options.
3. Think about your budget: If you want to know the price, go for a fixed deal.
4. Watch for exit fees: If you might change energy suppliers often, choose a variable energy tariff that has no extra fees.
5. Find dual fuel deals: Getting gas and electricity from one energy supplier can save you money.
6. Ask your current supplier: Current customers may find special fixed price deals.
7. Check out new tech: Homes that install heat pumps or improve efficiency can benefit from a flexible tariff.

Key Stats at a Glance

• Fixed rate tariffs: These give you a steady price, but you may pay exit fees.
• Variable tariffs: Prices can change, but the Ofgem price cap keeps you safe.
• Energy price cap (January-March 2025): It is set at 24.86p per kWh for electricity and 6.43p per kWh for gas.
• Dual fuel energy deals: These are simple to manage and might offer discounts if you use both types of energy in one account.

Understanding Green Electricity Tariffs

Green electricity tariffs are made for homes that want to help clean energy sources like wind, solar, and hydropower. When you choose these tariffs, the electricity you buy helps create clean energy. This helps reduce carbon emissions and supports a better future for everyone.

How Green Tariffs Work

• Suppliers connect the electricity you use at home to energy from renewable sources.
• These plans may also support carbon offset programs to help manage emissions from the grid.
• You can pick between fixed and variable green plans, giving you flexibility based on your preferences.

Cost of Green Electricity Tariffs

Costs have decreased over the years. However, green energy plans might have slightly higher rates or fixed fees. These charges help cover the expenses of renewable energy systems. Still, some companies now offer great deals on green plans that are close to regular energy plans.

Benefits of Green Tariffs

• It helps renewable energy projects.
• It lowers the need for fossil fuels.
• It gives peace of mind for eco-friendly homes.
• It helps fight price worries by keeping costs stable over time.

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The Process of Switching Electricity Suppliers

Switching electricity suppliers can help you save money and get a better deal. The Energy Switch Guarantee makes it quick, free, and easy to do this.

Steps to Switch Electricity Suppliers

• Compare electricity prices. Use tools to find the best deals for how much energy you use. Look for lower rates and small standing charges.
• Check your current tariff. See if there are exit fees if you have a fixed tariff.
• Provide meter readings regularly. Send an accurate reading to make switching and billing simple.
• Contact your new supplier. Share your energy account details and your first meter reading.
• Switching confirmed. Your electricity will remain on during the switch. This usually takes up to 21 days.

Benefits of Switching

• Save on electricity costs by selecting a fixed deal or a flexible variable rate.
• Avoid high fees that come with a standard variable tariff.
• Check for a dual fuel tariff to save more when using gas and electricity together.
• Choose greener energy options to save money over time.

How Electricity Prices Are Changing and What Influences Them

Electricity prices in the UK go up or down for many reasons. These reasons impact both fixed and variable tariffs.

Factors Influencing Electricity Prices

1. Wholesale energy costs: Changes in global energy markets and demand impact electricity prices directly.
2. Energy price cap: This limit, set by Ofgem, helps to protect households on standard variable tariffs from high rates.
3. Renewable energy investments: The costs of adding wind, solar, and hydropower to the energy grid can affect prices.
4. Seasonal demand: More energy is required during winter, which causes prices to go up.
5. Infrastructure costs: The standing charge includes the costs of maintaining and improving energy networks.
6. Global events: Problems in different parts of the world can disrupt energy supplies. This disruption raises costs.

Latest Predictions for Electricity Prices

• Prices may change frequently due to demands in the global market. There is also more demand for electricity in the colder months.
• Putting money into renewable sources might help keep electricity costs stable over time.
• The Ofgem price cap will continue to protect households with variable tariffs.

Support Options for Struggling with Electricity Bills

For families that struggle to pay their electricity costs, there are several ways to get help. These options can help you manage your bills and keep your service connected.

Financial Support Schemes

1. Warm Home Discount: This is a £150 payment for families that qualify. It helps with winter bills.
2. Household Support Fund: Local councils provide emergency cash to low-income families.
3. Winter Fuel Payment: This helps older people with money during the cold months.

Energy Supplier Support

• Speak with your energy supplier about setting up affordable repayment plans for bills you owe.
• Request a prepayment meter to help you pay in smaller, more manageable amounts.

Smart Meter Benefits

• Get a smart meter to see your electricity usage right away and save energy.
• Send in regular meter readings so you can avoid getting wrong estimated bills.

Tips for Reducing Electricity Bills

• Switch to a better deal that has lower rates and fees.
• Improve your home’s energy efficiency with new appliances and better insulation.
• Check out dual fuel plans to save money on gas and electricity.
• Reduce energy use by using energy-saving lights and heating systems.

These steps can help families manage their electricity costs. They can also stop money problems.

FAQs About Fixed vs Variable Energy Tariffs