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Understanding energy tariffs

In this guide, we take you through the pros and cons of different energy tariffs.

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What are energy tariffs?

Energy tariffs are used by suppliers to determine a customer’s charge for gas and electricity. There are different types of tariffs, and they have their own pros and cons.

Choosing a new supplier based on potential savings does make obvious sense, but it can be really useful to know more about the tariff types. One might be better for you and your household usage or personal preferences.

We’ve put together this guide to help you understand tariffs better, and make it easier for you to compare them.

What is a standard variable rate energy tariff?

Sometimes referred to as an ‘evergreen’ tariff, these tariffs offer a lot of flexibility as you are not tied to a fixed end date.

Standard variable tariffs are sometimes referred to as ‘default tariffs’, as customers are automatically put on this tariff if they don’t request a fixed tariff or a new supplier.

PROSCONS
Flexible contract, and no exit feesTend to be one of the most expensive tariffs
Benefit from price cap reductions and or price cuts from your supplierPrice hikes from the market or your supplier affect your unit rate
Supplier informs you of upcoming price changesBills will vary, even if your energy usage doesn’t

What is a fixed-rate energy tariff?

Your unit rates and standing charges are fixed within a defined time period. It is up to you to decide how long your tariff is, which can be anything between a year, 18 months, 2 years, or 3 years.

PROSCONS
Guaranteed unit rate and standing charges until contract end date Price cuts (e.g. reduced wholesale energy prices) not applicable to your
Option of 12, 18, 24, and 36 month contractsExit fees charged if you terminate tariff outside of notice period
Tend to be better value than standard tariffsYour supplier will automatically enrol you onto a standard (i.e. more expensive) tariff if you don’t renew your fixed one 

What is a dual fuel tariff?

Your gas and electricity is provided by the same supplier, and they tend to offer a discount on their unit rates and standing charges if you choose a dual fuel tariff.

PROSCONS
Convenient; bills are managed from a single accountReadings still taken from a single meter (unless you own a smart meter)
Unit rate and/or standing charge discount offered by the supplierDiscount offered may not be greater than savings achieved using separate suppliers

What is a prepayment tariff?

Essentially a ‘pay-as-you-go’ solution for energy usage, customers put as much money as they wish to use on a card, key, or tokens. In other words, customers can pay for their energy usage in advance.

It is important to note that standing charges still apply to prepayment meters. Therefore, if you are planning to be away for a while, then make sure you have an adequate amount of credit. Otherwise, your appliances (e.g. a fridge) may shut off while you are away.

PROSCONS
Control your energy spending instead of waiting for bills

Topping up a card, key, or token can be very inconvenient

e.g. Accessibility issues, top-up point is closed, adverse weather

Emergency credit is available in case your pre-paid credit runs outMeter may not be conveniently located, therefore it is difficult to monitor your remaining balance
‘Friendly credit’ or non-disconnect function offers safety net ensures that credit won’t run out during ‘out-of-hours’ times (i.e. when shops close)Comparably high unit rates and standing charges

What is a green tariff?

A supplier promises to match either some or the entirety of its electricity supply from renewable sources; this is usually guaranteed by Renewable Energy Guarantees of Origin (REGO) certificates.

More suppliers are now using renewable energy in their electricity fuel mix, but ‘green gas’ is still limited in the UK. Only a handful of suppliers generate their gas and electricity through renewable energy sources.

PROSCONS
Lower carbon emissions, and therefore better for the environmentTend to be more expensive than non-green tariffs
Initially high costs of renewable energy infrastructures are receding, and increasing energy ROILow-carbon and renewable energy market still in its infancy

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