If you opt for a fixed tariff, the cost of each unit of gas and electricity you use is fixed for an agreed term.
However, it’s important to note that the size of your bill isn’t fixed. The more units you use, the bigger your bill will become. But 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.
What are the benefits of fixed price tariffs?
There are no nasty bill shocks with a fixed energy tariff, 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 is the yearly cost you are likely to pay. Competition in the market has pushed down the price of fixed tariffs and they are now usually cheaper than standard deals. 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?
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 £30 per fuel 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 by moving to a cheaper deal.
Plus, suppliers are becoming more innovative with the way they approach exit fees. This year, 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.
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.