Variable energy tariff vs fixed
What’s a fixed energy tariff?
In short, a fixed price energy tariff gives you a set price-per-unit of energy (kWh) for a given period of time to protect energy customers from wholesale price hikes.
The most common fixed energy tariffs give you a set price-per-unit of energy for one or two years. It’s important to bear in mind that this is just the unit, not your whole annual bill, so your energy bill can still vary depending on how much energy you use.
The thing fixed energy tariffs protect you from is wholesale price hikes. For example, if the cost of oil goes up, this will be reflected in the price cap, which allows energy suppliers to raise the unit price of their energy. However, if you’re on a fixed energy tariff, you are immune to the impact of price cap rises.
However good this might sound, it can have its drawbacks. For example, if the wholesale price of energy were to drop and energy suppliers lowered the price per unit of energy as a result, you would not partake in any savings because your tariff is fixed.
In summary, a fixed energy tariff gives you fixed a kWh, not a fixed bill price!
The benefits of a fixed energy tariff
The main benefits of a fixed energy tariff are as follows:
- Accurate billing predictions: You’ll be able to more accurately predict how much your energy bill will be each month due to the fixed price-per-unit of energy, and can budget accordingly.
- Price increase protection: When the price-per-unit of energy increases, customers in fixed energy deals are protected for the length of the contract.
- Potential cheaper bills: Fixed energy tariffs are some of the cheapest on the market at any one time, allowing customers looking for cheaper deals to save money on their annual energy expenditure.
One of the key disadvantages of a fixed energy tariff is customers may miss out on price-per-unit savings if the price cap falls, but this is a risk people are willing to take for cheaper annual energy bills.
What’s a variable tariff?
A variable tariff - or standard variable tariff as it is often referred to - is an energy supplier's default energy tariff, and is usually the most expensive deal they have to offer.
If a customer does not specify what tariff they’d like to be put on, or if their tariff comes to an end, they will automatically be put on a default variable tariff, which is why it’s important to remain vigilant regarding your energy tariff. If you allow yourself to roll onto a variable tariff, you could end up paying a lot more than you should be paying.
Unlike the fixed rate tariff, with the variable tariff your price-per-unit of energy can fluctuate, which can be both good and bad. If the price cap goes down, so does the amount of money you pay per kWh of energy, which means you could end up saving money. However, if the price cap goes up, so does your kWh cost.
The benefits of a variable tariff
The main benefits of a variable energy tariff are as follows:
- Take advantage of price cap falls: If the price cap falls, customers on variable tariffs could end up saving money, as their price-per-unit of energy will end up falling.
- No exit fees: Standard variable energy tariffs don’t often come with exit fees, allowing you to switch deals freely if you find a cheaper one that’ll help save you money.
Alternatively, if the price cap rises, you could end up paying more per kWh of energy, which means you could see an increase in your energy bills if you’re not careful.
Should I get a fixed or variable tariff?
Even though both have ups and downs, it’s completely personal preference.
If you enjoy the notion that your annual energy bill will not increase over a lengthy period of time (12 to 24 months), then the fixed price tariff is the energy tariff for you. Wholesale energy price rises will not affect you, and you won’t need to concern yourself with any price cap news.
If you enjoy flexibility, and the freedom to move from tariff to tariff when it suits you best in order to look for the best deals that’ll save you money, then a variable tariff is probably your best bet.
However, if you opt for the fixed price tariff, bear in mind that when it comes to an end, you’ll automatically be put on your supplier’s default variable tariff. So be aware when your fixed contract comes to an end so you can switch to another tariff.
Where can I find the best variable and fixed tariffs?
Finding the best energy deals on the market doesn’t have to be time-consuming. We’re here to do all the hard yards for you.
Simply enter your postcode when you visit our website, enter a few of your details (with a utility on hand if possible) and away you go. We’ll compare all the hottest deals in the energy market right now for you, and if you find a tariff that’ll save you money, we’ll handle the switch for you.
You’ll be able to set your preference to search for either a variable or fixed tariff. Feel free to search for both so you can get a feeling of how much money you could save with either.