Opting for a fixed-price tariff allows you to lock in the cost of the energy you use in your home for a set time. This means you don’t have to worry about the supplier’s ‘unit energy price’ fluctuating, and potentially spending more than you expected.
Fixed price energy deals are typically available for between 12 and 24 months, although some can extend to three years.
The alternative to a fixed-price energy tariff is a standard variable rate tariff, the cost of which fluctuates according to wider market energy costs. But while variable deals don’t tie you in, they are not usually the cheapest way of buying your gas and electricity.
How do fixed energy tariffs work?
Fixed-price energy tariffs guarantee that your standing charge and unit cost of gas and electricity (which make up your total bill) will not change for the length of the contract.
This doesn’t mean that you will pay the same for your energy bill each month, however. It’s the cost of the energy unit that is frozen. So, if you are on a fixed plan and use more or less energy in one month compared to another, your bill will still change accordingly.
Fixed-price tariffs offer the protection of locked prices and competitive market rates. They are often attractive to people looking for a short to medium-term means of budgeting on their energy bills.
In some circumstances, fixed-price energy can end up more expensive than variable-rate tariffs however, especially if you sign up for a deal of 18 months or longer.
Fixed-price energy plans also charge exit fees (typically £30 per fuel) which are payable if you switch tariffs before your contract ends (but won’t be levied if you are within 42 days of your tariff ending).
How much does fixed rate energy cost?
Whether fixed-rate energy tariffs are cheaper than variable rate tariffs depends on the wider energy market.
If wholesale energy prices are high, fixed-rate energy deals could cost more. But you may consider this a premium worth paying in return for the guarantee they offer that the unit energy cost won’t change.
As a general rule though, you will pay less by opting to fix the cost of your energy.
Does it matter what meter you have?
Some fixed price energy tariffs are only available if you have a smart meter installed in your property.
A smart meter means that you only have to pay for the exact amount of energy you use as the device communicates wirelessly with your energy supplier and means you don’t need to submit meter readings yourself.
What happens when your fixed-price energy tariff ends?
While your provider must give you advance notice, it’s a good idea to make a note of the date your fixed-rate gas and electric tariff finishes.
At this point, your tariff will revert to your supplier’s standard default tariff, which is typically a standard variable rate. And in most cases, this will be more expensive than the fixed-rate you were previously paying.
Keeping your end-date in mind gives you time and options for finding the next best energy deal whether that’s with your current supplier or a different one.
When should you switch to a fixed rate energy tariff?
You should consider switching at any time, as long as it’s to a better deal for you. Energy costs tend to go up in winter so be sure to compare deals before the colder months to find the best offers.
If you are already on a fixed tariff, you will want to check if your supplier charges exit fees for leaving your tariff before the end of the contract term, and whether the savings made on your new tariff will make up for that cost. Ask your supplier when your contract is due to come to an end if you are unsure.
How do you switch to a fixed rate energy tariff?
Switching to a fixed-price tariff is simple. Just head to a comparison website and enter a few details about your current provider, tariff and energy usage and it will list the cheapest deals available.
Other ways to keep energy costs down
Reducing your energy usage small changes such as using energy-saving lightbulbs, turning appliances off rather than leaving them on standby and setting your washing machine to no more than 30°C can help lower the amount of energy you use, and in turn your energy bills.
You can also reduce your energy costs by:
Paying by direct debit Typically paying monthly by direct debit is cheaper than paying quarterly, or by cheque or cash
Choosing an ‘online-only’ tariff Suppliers charge less as they won’t send you paper bills or correspondence
Making home improvements Adequately insulating the roof, walls and floors of your property and draught-proofing windows and doors can reduce heat loss and the need to keep your heating on high