What Is a Fixed Energy Tariff?
A fixed energy tariff locks in the unit rate and standing charge you pay for a set period, typically 12 or 24 months. This means your per-unit price won't change during that period, giving you certainty over your costs. However, your actual bill can still vary based on how much energy you use, as you're fixing the rate rather than the total bill amount. Fixed tariffs may come with exit fees if you want to leave before the term ends, though many suppliers have removed these.
What Is a Variable Tariff?
A variable tariff means your unit rates and standing charges can go up or down over time, usually in line with the Ofgem energy price cap which is reviewed quarterly. The standard variable tariff (SVT) is the default tariff your supplier will move you onto when a fixed deal ends. Variable tariffs offer complete flexibility with no exit fees, allowing you to switch at any time. However, they offer no protection against price increases and are often more expensive than the best fixed deals available.
Which Should You Choose?
In general, if energy prices are expected to rise, locking in with a fixed tariff can protect you from increases. If prices are expected to fall, a variable tariff lets you benefit from reductions. When the market is uncertain, many experts recommend a 12-month fix as a good middle ground. Always compare the total annual cost of available tariffs rather than just looking at the unit rate, as standing charges can vary significantly between deals.