Fixed Price EnergyEnergy prices usually seem to only be going in one direction, especially when you get towards the winter months. So the appeal of fixed energy tariffs is sure to get your attention.
A fixed energy plan means that when you sign up to the tariff with your provider, you will be offered a set price that will remain in place for the agreed period of time, usually 12 months.
So you can rest assured that the price you pay for your gas and electricity will not vary for the length of the plan, as it is a fixed price.
Nearly a quarter of us either cannot afford to turn on our heating, or will only put it on when the weather really takes a turn for the worst. It is no wonder, given that the average price of our energy bills is £1,287 a year if you have stuck with a provider's standard tariff.
But moving to a fixed deal can save up to 15% on your energy bills, so there is a big saving to be had.
The pros and cons of a fixed price energy tariff
Getting a plan that fixes the amount you have to pay for your gas and electricity may seem like a panacea for energy bills, but there are some downsides to choosing a fixed tariff.
- You can save up to 15% on your bills compared to standard energy tariffs
- You know exactly how much you are going to pay for as long as your deal lasts, so you will not face any nasty surprise price rises
- You can budget more effectively for your household bills
- A fixed deal is unlikely to be the cheapest option. While the best online fixed tariffs tend to be less expensive than standard prices, they are usually dearer than online variable deals because you are paying a slight premium for the security of fixing
- You will not benefit from any falls in energy prices
- If you want to leave your deal before it expires, you may have to pay an exit fee
Once you have signed up to the contract, you will be penalised if you leave early so you need to check that the contract you are looking at is right for you. You should compare not only the prices of fixed energy tariffs, but also the details of the contract as the cheapest may not be the ideal one for you.
It is vital that you read through the terms and conditions of your energy provider's fixed rate tariff before you sign up. Even if you think at the start of your deal that you will not leave it until the end of your deal, your circumstances could change in the meantime, and you need to know what charges you could expect, or what you would need to do if you had to break the contract early.
If there have been significantly falls in energy prices, you may be able to get the cheapest rate available by switching supplier before you get to the end of your deal.
But you must take into account the penalty you will pay compared to the saving you will make. If your penalty is too high, then you should wait.
The difference between a fixed tariff and a capped price plan
Although both a fixed price tariff and a capped price plan provide you with a level of security in relation to the amount you will pay for your energy, there is one major difference.
A fixed price plan will guarantee that you pay an agreed price for a set period of time. A capped price plan will ensure you do not pay more than a set price for a set period, but you may pay less than this, and you will also benefit from any reductions in energy prices made by your provider.
How can I find out when my fixed tariff ends and what do I do?
Your energy provider should contact you to tell you that your fixed period is about to end - usually you get a letter about a month before.
This is the time to start looking into switching because if you do nothing most providers will move you onto their standard tariff which will probably be significantly more expensive.
You should always be looking for the cheapest deal on the market. Use the MoneySupermarket.com online energy calculator to find the best value product for you.