What’s a fixed rate energy tariff?
A "fixed price" energy tariff means that your unit price for gas and electricity will not change for the duration of the plan. A variable rate means your energy price can vary during the plan.
If you have a fixed price plan and your supplier announces a price rise, your rates will not change.
Fixed rate tariffs offer you security and can be some of the cheapest deals. Many suppliers offer fixed prices that are a lot cheaper than their Standard variable tariffs. However, bear in mind you won’t benefit from any price cuts while on a fixed deal. And, should you increase your energy usage, you will pay more as fixed tariffs will only guarantee the price of the standing charge and the pence per kilowatt hour cost of electricity or gas.
What’s a variable energy tariff?
A variable energy tariff is where your per-unit gas and electricity costs can vary at the discretion of your supplier.
Variable rate deals tend to be more flexible and you can normally get out of a variable rate contract without incurring any fees.
Fixed or variable tariff
Fixed versus variable energy plans
|Fixed rate||Variable rate|
|Pay the same price for your energy units for at least a year||Your per unit energy cost can go up or down|
|Your contract lasts one year (but might be longer)||Your contract is open ended|
|Early exit fee of £30-£60 if you leave before your contract end date (some plans don’t charge this)||No exit fee, you can leave whenever you want|
Advantages of a fixed rate deal
The most obvious advantage is having a fixed price for a year, so you can easily budget your monthly expenditure.
There’s also a lot of choice as most energy suppliers offer a fixed rate plan, so the market is quite competitive.
This means you should be able to choose between the longest fix, the cheapest monthly cost, or find a plan without an early exit fee.
It’s quite likely that the cheapest energy deal available to you will be a fixed rate plan, but this isn’t always the case.
Disadvantages of a fixed rate energy plan
If the price of energy drops you could end up stuck paying above the going rate for your gas and electricity.
You can get out of your contract, but expect to pay early exit or cancellation fees. These will likely be somewhere between £25 and £60 for switching away before your tariff ends
Should you get a fixed or variable price energy plan?
Think about your current financial situation, and consider how often you’ll have the time to compare the energy market for better deals.
If a fixed plan isn’t your cheapest option, think about whether you’d prefer to pay slightly more to guarantee your energy costs won’t go up.
You can always run an energy plan comparison to see all the plans that offer savings on your current plan. Then check which of those plans are fixed rate plans.
When your fixed plan comes to an end
When your fixed plan ends your supplier will put you on their standard variable tariff. This tariff is typically their most expensive deal.