A fixed energy tariff simply means the cost of each unit of gas and electricity you use will stay the same for an agreed term. But this doesn’t mean the size of your bill is fixed – the more units of energy you use, the bigger your bill will be.
With a fixed rate energy tariff, each unit will cost the same for the duration of the fix, regardless of what happens to prices elsewhere. In other words, you will pay the same amount for every unit of energy you use, even if your supplier increases prices.
This might seem like a gamble, but you could save up to £253 per year if you were to switch from a Big 6 standard variable tariff to the cheapest fixed tariff.
The average Big 6 standard variable tariff is £1,131 and the cheapest fixed rate tariff is with Green Network Energy at £878 – the difference is £253. According to MoneySuperMarket data, correct as of March 2018.
What are the benefits of fixed price tariffs?
With a fixed energy tariff you won’t get any nasty bill shocks, so it’s easy to budget for your energy costs. But the big attraction of a fixed energy tariff is that it buys you protection from any price hikes during the term of the contract.
Another benefit to fixed rate tariffs is that they are often cheaper. Competition in the market has pushed down the price of fixed tariffs and they are now usually cheaper than standard deals.
Ogfem says that around 57% of people use standard variable rates and end up overpaying roughly £300 per year on average. But it’s important to compare prices because tariffs vary and you could pay a premium if you want to fix for longer than a year.
In the past few years, the number of new gas and electricity providers entering the market has increased. Smaller providers, such as Avro, Bristol Energy and Affect Energy, often offer some of the cheapest fixed rate tariffs on the market – giving ‘Big 6’ energy providers such as British Gas and nPower a run for their money.
Are there any negatives to fixed price energy tariffs?
There are some downsides to fixed rate tariffs. Most suppliers charge a fee if you want to switch to another deal before the fixed tariff expires. For example, you might have to pay up to £40 per fuel type if you sign up to a one-year fix but want to leave after six months.
But don’t let an exit fee put you off switching because you could still save money overall by moving to a cheaper deal.
Plus, suppliers are becoming more innovative with the way they approach exit fees. Newcomer to the energy market, Bulb, became the first energy supplier to refund customers any exit fees paid to their old supplier when switching to one of their tariffs.
The other downside of a fixed energy tariff is that you do not benefit if your supplier cuts energy prices because your unit cost is frozen.
76% of customers who switch energy with MoneySuperMarket switch to a fixed energy tariff. According to MoneySuperMarket data, correct as of March 2018.
How can I find out when my fixed tariff ends?
Suppliers must notify customers that a fixed deal is coming to an end between 42 and 49 days before the contract expires. They cannot charge an exit fee if you decide to switch during the notice period.
Suppliers are also not allowed to automatically roll you over onto a new fixed contract if you decide not to switch. Instead, they will move you over to their standard tariff.
Standard tariffs are often the most expensive on the market so make sure you make a note of when your fixed tariff comes to an end and switch to another provider to avoid an increase to your energy bills.
What is the difference between a fixed price tariff and a capped energy tariff?
It’s easy to confuse a fixed tariff with a capped energy deal – and both offer some sort of price protection.
But the unit cost of energy on a capped tariff is not fixed. Instead, the supplier guarantees that the unit rate will not rise above a certain level for a set period. You could pay less than the cap for your energy, and you could also benefit from any price cuts.
The average price of a typical bill for one and two-year fixed tariffs. According to MoneySuperMarket data, price correct on March 7, 2018.
How to switch to a fixed price deal
The first step in switching is to compare energy tariffs and find the option that suits your usage needs best. You’ll be asked to enter details from your last energy bill, so the tool can estimate how much money you could save – but if you don’t know this, it’s possible to estimate your usage.
When comparing results, you’ll be able to choose whether you’d like to review different tariffs with your current supplier, switch to a big name provider to choose from the full range of energy deals. When you filter results, you can choose to compare dual fuel, just gas, or just electricity.
Once you’ve found the dual fuel tariff you’d like to switch to, you can complete this process online. Your new energy provider will contact your old one, you’ll be asked to submit meter readings and then the switch will take place within 21 days. There’ll be no disruption to your energy supply.
Find out more about switching energy suppliers.