Unsure what to do at the end of your energy contract? Could you save by switching supplier? Here's what to do, and how to avoid overpaying on standard variable rate tariffs.Read More
The principal difference between fixed price and standard variable tariffs comes down to the cost: with a standard variable rate tariff, the cost of each unit of energy you consume can go up and down at your supplier’s discretion. Costs usually fluctuate in line with the rise and fall in wholesale energy prices, but if you’re on a standard variable tariff your supplier can change the unit price of your electricity and gas for any reason and with no warning.
A fixed price tariff offers you a fixed unit cost, which remains constant for the duration of your tariff (typically 12-18 months). Remember, though, that you’re not fixing the price of your bills, just the cost of each unit of energy you use, so they will continue to fluctuate throughout the year based on your actual consumption.
The main benefit of fixed price energy is the fact that the price is guaranteed to not get more expensive while customers are on that plan. This offers protection from suppliers raising prices in response to outside factors like wholesale gas fees or conflicts in key supply areas. The total cost of energy for the duration of the tariff, therefore, may end up significantly cheaper than it otherwise would be.
Having said that, there are people who prefer the flexibility of a standard variable tariff because they tend to be rolling contracts that go from month to month (though there are exceptions, so make sure you check if you decide to sign up to one). This gives them more power over their energy than those on a fixed tariff, who are usually committed to them for up to 18 months (unless they wish to leave early and probably incur an exit fee). Whether you opt for a fixed plan over a standard plan may well depend on what you feel is most important in terms of price and flexibility.
The main advantage of fixed rate energy is that the cost of each unit of energy you consume won’t increase during the duration of the plan. This protects you from the natural volatility in the energy market that sees wholesale energy prices rise and fall as suppliers react to changes.
Thanks to fierce competition between energy suppliers, the deal is further sweetened by generous discounts, which can see you offered fixed unit rates that are significantly less than the current standard variable rate tariff. This means that not only do you gain peace of mind over your energy bills for a fixed period, there’s a potential saving of hundreds of pounds over the lifetime of the tariff.
There’s also the risk that while you’re on the fixed tariff, the wholesale cost of energy may fall sharply to leave you trapped on a more expensive tariff than the standard variable rate, which could ultimately cost you more over the lifetime of the tariff. That said, in most cases, customers tend to save more with fixed-price deals.
Fixed-rate tariffs also tie you to the length of the contract you sign, typically 12-18 months. If you wish to switch tariffs while there’s more than 49 days left to run on your current tariff, you’ll most likely incur an exit penalty – usually £10-30 per fuel. Not all suppliers enforce exit fees, but most do.
By contrast, while standard variable tariffs don’t offer the security of a fixed price, they’re more flexible in that you’re not committed to a lengthy contract (always check the terms and conditions to make sure). Most offer monthly rolling contracts, allowing you to switch to a new plan or supplier quickly without incurring an expensive exit fee.
While your supplier should notify you – by letter, email or even text message – 49 days before your current fixed-price tariff is due to end, it’s a good idea to mark down the date in your diary. This magic ‘49’ figure is important because once you pass it, you’re free to switch to a new deal without incurring any exit fees from your current plan.
When your tariff enters this 49-day period, start shopping around for a new deal. If you haven’t switched by the date your plan ends, you’ll be rolled onto your supplier’s standard variable plan, which could see you suddenly paying far more for your energy than you currently do.
The key to comparing fixed price plans is to know exactly how much energy you currently use and which plan you’re currently on. Price comparison websites usually ask for details of your current usage and plan, so the more accurate you can be in terms of what you tell them, the better. This will enable their systems to match you with the most suitable deals.
The information you need can usually be found on your latest bill, whether it’s for the last month or the last quarter. It can be difficult to find your exact usage on there but, once you have, write it down somewhere to refer to it if you intend to search multiple websites. Once you’ve been presented with the available plans, you can use filters that take the likes of exit fees, billing options, incentives and more into account to help you find the best possible fixed price plan.
The simplest way to find the best fixed rate energy deals is through a price comparison website, which can perform the switch for you.
When you come to search for a new deal, make sure you know exactly how much energy you’re currently using, plus your supplier and the plan you’re currently on. Price comparison websites usually ask for this information to calculate the best possible deals on your behalf, so aim to provide as much accurate information as possible.
You can usually find this information on your latest bill – whether it’s a monthly or quarterly one. It can be difficult to determine your exact usage from this but look for an ‘estimated annual usage’ figure for each fuel. Once entered, you’ll be shown a list of available plans – use the filters to consider things like exit fees, billing options, incentives and more to help you find the best fixed energy deals for your personal needs.