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 obvious.
A fixed energy plan means that when you sign up to the tariff with your supplier, you will be offered a set price that will remain in place for the agreed period of time. It's usually for 12 months, but longer fixes are available.
With a fixed tariff, 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 charged at a fixed price per unit of energy.
That does not mean the size of your bill is fixed, of course - the amount you have to pay will vary according to the amount you use. It's the price of each unit you use that is fixed.
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 silver bullet 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 might not be the cheapest option. While the best online fixed tariffs tend to be less expensive than standard prices, there could be online variable deals that are cheaper - that's why it's important to compare across the whole market.
- If you remain on a fixed tariff, you will not benefit if energy prices fall.
- 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 may 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's vital that you read through the terms and conditions of your energy supplier's fixed rate tariff before you sign up.
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 between 42 and 49 days before your fixed period is due to end.
This is the time to start looking into switching because if you do nothing, most suppliers will move you onto their standard tariff which will probably be significantly more expensive.
If your tariff includes early termination fees, they will not be charged once you are within 49 days of your tariff ending. In other words, you can switch at this point without penalty.
You should always be looking for the cheapest deal on the market. Use the MoneySuperMarket's energy channel to find the best value tariff for you.
†10% of customers could save up to £670. MoneySuperMarket Data, May 2016