Fixed price energy tariff explained

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What is a fixed price energy tariff?

Fixed price gas and electricity tariffs ensure that the price you pay for each unit of energy will be the same throughout the length of the contract (which is between one and four years). This does not necessarily mean that you will pay the same amount on bills each month, as the unit price is fixed – the more units of energy you use, the more your bills will be. This means that if your supplier’s prices rise, this will not affect your bills. 

This is different from a standard variable tariff, which has a certain defined price for the use of energy, but these prices can change. With these there is also no contract, whereas there is one for fixed energy tariffs.

Otherwise, Fixed Price Energy Tariffs are pretty similar to other types of tariffs; they have a standard charge (although you can take it out as a no standing charge tariff if you can find one!), and you can also take it out with an economy 7 or 10 meter if you have one installed.

What are the benefits of a fixed price energy tariff?

Fixed-price energy tariffs are often cheaper than variable tariffs, with most supplier's average annual variable tariffs being more expensive than their cheapest tariffs - which are mostly fixed price tariffs:

Source: Ofgem

Also, you will be protected from energy prices increasing since your rates are fixed. It is also easier to manage your budget if you know the cost per unit of energy throughout the contract, as your bills will be the same if you use the same amount of energy each month. You also have a wide choice of suppliers, since most suppliers offer a fixed tariff. 

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Are there any downsides to fixed price energy tariffs?

• Fixed-price energy tariffs usually start off more a bit more expensive than a standard variable tariff, the idea being that if/when the cost of gas or electricity goes up you will then be getting a good deal on your energy. The longer your contract, the higher the price you will pay per KWH (usually) for this very same reason - energy suppliers will want to protect themselves as much as they can long term. 
• Although you are protected from energy prices increasing, you will not take advantage if the costs go down. 
• Also, you may have to pay exit fees if you decide to switch before the end of your contract. These can range from between £25-£50, and may have to be paid for each fuel type.

What to do at the end of your fixed tariff

At the end of the tariff, you should find out which plan your supplier will move you to. This will likely be the supplier’s ‘Standard Plan’ (which is variable). You may be offered the chance to take a fixed tariff again, so you may wish to do so. Once you know which plan you are being moved to, you can compare energy plans online to compare it to other deals, or switch energy supplier if you could save more with a different supplier.  You will have a specific date that it ends at, but you can switch your tariff 49 days before the end date without an exit fee. 

Can I switch to a fixed price energy tariff?

Yes, and the process is handled by the company you are moving to. Switching energy suppliers is now easier due to the Energy Switch Guarantee, which means you are guaranteed to a switch within 21 days. You will stay on your current tariff until the process is complete, and you will not be without gas and electricity at any moment. When you switch, credit from your old account will be refunded within 14 days of your previous energy bill, and if you change your mind within these 14 days, you can stay with your previous supplier. 

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