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.
| PROS | CONS |
| Flexible contract, and no exit fees | Tend to be one of the most expensive tariffs |
| Benefit from price cap reductions and or price cuts from your supplier | Price hikes from the market or your supplier affect your unit rate |
| Supplier informs you of upcoming price changes | Bills 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.
| PROS | CONS |
| 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 contracts | Exit fees charged if you terminate tariff outside of notice period |
| Tend to be better value than standard tariffs | Your 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.
| PROS | CONS |
| Convenient; bills are managed from a single account | Readings still taken from a single meter (unless you own a smart meter) |
| Unit rate and/or standing charge discount offered by the supplier | Discount 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.
| PROS | CONS |
| 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 out | Meter 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.
| PROS | CONS |
| Lower carbon emissions, and therefore better for the environment | Tend to be more expensive than non-green tariffs |
| Initially high costs of renewable energy infrastructures are receding, and increasing energy ROI | Low-carbon and renewable energy market still in its infancy |
