Your need-to-know guide to the benefits of fixed rate energy tariffs
Fixed Rate Energy Tariffs
When you’re looking for a new contract for your gas supply or electricity supply, you’ll notice a vast amount of deals are available. With hundreds of energy companies offering a wide variety of tariffs and contract types, it can be challenging to get your head around what’s on offer and which deals will give you the best value for money.
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How fixed-rate contracts work
Gas and electricity contracts usually last between one and four years. During this time, a customer on a fixed-rate tariff will pay a fixed price per unit of energy used.
This does not mean that the final amount on a monthly bill will be fixed, but that the cost of energy does not change. The more units of energy a household uses, the more they will be charged on their next energy bill.
Your bills won’t be affected by the market price of gas or electricity, but only by how much energy you choose to use from month to month.
Typically offering a cheaper alternative to standard variable tariffs, if you choose a fixed-price energy tariff, you will be tied in for the duration set out in your contract. You’ll benefit from cost savings at face value and protected from price rises, but you need to see your contract through to the end date or you’ll be charged an exit fee.
The advantages of fixed-rate energy tariffs
- Fixed-rate energy deals can save you hundreds of pounds each year.
- The rates you pay for energy will be protected and won’t increase in line with market fluctuations.
- Managing household budgets is simpler and easier when you pay a fixed price per unit of energy.
- There’s a wide selection of fixed-price tariffs, which are offered by most energy suppliers.
The disadvantages of fixed-rate energy tariffs
- Sometimes starting rates are more expensive than variable tariffs.
- Exit fees will be charged if you leave your contract early.
- You won’t benefit if there is a decrease in the wholesale cost of electricity or gas.
- After your contract ends, you may be switched on to an expensive default tariff if you don’t compare and switch to a deal offering better value for money.
What to do when your fixed rate deal expires
What happens to fixed-rate deals if you move house
Many suppliers will also give you the chance to end your contract without paying an exit fee when you move. There’s no clear answer, as the specifics will depend on how your energy provider works.
If you choose to discontinue your fixed-rate deal in your new home, make sure you prioritise finding new gas and electricity tariffs. Otherwise, you’ll be automatically placed on an expensive deemed contract. Make sure you take meter readings at your old and new properties and inform your suppliers of these, too.