Guide to fixed-price energy tariffs

·7-min read
 (Pixabay)
(Pixabay)

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.

Top 10 cheapest fixed rate tariffs

Supplier

Tariff name

Cost

Spark Energy

Tili Select Saver - Sept 2021

£1,066.86

ScottishPower

Greener Future April 2022 IM2

£1,089.98

ScottishPower

Exclusive Green Fixed Price May 2022 SM1

£1,090.09

ScottishPower

Exclusive HelpBeatCancer FixedSaver Aug2023 Online

£1,144.99

Shell Energy

Energy February 2023 plus Solar Credits

£1,148.92

Pure Planet

100% Green Exclusive 24m Fixed Aug21 v1

£1,246.27

Utility Warehouse

Green Fix 15

£1,249.95

Zebra Power

Zebra 24 Months V11 Paperless

£1,269.43

Zebra Power

Zebra Fixed 24 Month Exclusive V9 Paperless

£1,273.08

Outfox the Market

Fix'd 12m Sep21 v1

£1,293.84

Cheapest deals based on dual fuel tariffs for an Ofgem-defined ‘medium user’, paying by monthly direct debit. Note, these may not be available in every region of the UK. Source: Comparison Technologies, correct as of 22 September 2021.

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 energy 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 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.

What is the energy price cap?

This is a cap that limits how much energy companies can charge for units of gas and energy for customers on their standard variable rate (or ‘default’) tariffs. It is expressed as an annual figure that is the maximum amount a typical family would pay if they used the average amount of energy.

The cap, which is set by the market regulator, Ofgem, changes twice a year in April and October. In April 2021 it rose to £1,138 and this figure will rise again on 1 October 2021 to £1,277, its highest-ever level. For prepayment meters, the cap rose to £1,156 in April 2021. This figure will also rise at the beginning of October to £1,309.

Can I switch tariffs if I have a prepayment meter?

Yes - you can use an energy comparison service such as ours to shop around for a more competitive prepayment tariff. You simply tell us about your home and your energy usage and we will show you a list of prepayment energy tariffs you can switch to.

You might also consider switching from prepayment to a credit meter as credit tariffs are almost certainly going to be cheaper than equivalent prepayment ones. You can ask your current supplier if it will swap meters for you - some will charge a fee (£50 - £60), others won’t. But the saving you make by switching will usually be more than any cost.

If you have a poor credit history, your supplier may require you to stay on a prepayment tariff. If you are renting, you should talk to your landlord about the possibility of switching.

Are fixed tariffs better than variable rate tariffs?

When it comes to price, there’s a wider choice of fixed rate tariffs with competitive prices. But there are a good number of cheap variable rate tariffs as well, so you may find both when you run a price comparison.

The point of a fixed tariff is that the price per unit of energy is locked in for 12 or 24 months, so you have price security (but remember it’s the price per unit that’s fixed, not the amount you pay - the more energy you use, the bigger your bill). With a variable tariff, the price per unit can rise or fall as your supplier deems sit, usually to reflect changes in the wholesale price of gas and electricity).

The variable rates to avoid - or to switch away from if you’re on one - are standard variable rate or ‘default’ tariffs. These are usually priced at or close to the official price cap, which is currently £1,138 a year for average users. There are many fixed and variable rate tariffs that are more competitive.

If you are on a fixed tariff and do not switch when it comes to an end, you will be moved to your supplier’s default tariff - so beware!

Other ways to keep energy costs down

By making small changes such as using energy-saving light bulbs, turning appliances off rather than leaving them on standby and setting your washing machine to no more than 30°C, you can 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

Read More

Best cheap energy deals: fixed rate and variable rate energy offers September 2021

How to understand your energy bills

Best energy suppliers 2021

Energy tariffs explained

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