Is a fixed or variable energy tariff better?

I get asked a lot whether people should go with fixed or variable tariffs when it comes to their energy provision and in the same way there are fixed and variable rate options when it comes to mortgages there are similar options when it comes to energy tariffs.

It’s well worth looking at the fixed tariff option as the savings could be substantial.

Which one is better for you, depends on your circumstances and the prices on offer at the time. Currently, there are many people who would be better off fixing so it’s well worth looking at this option as the savings could be substantial.

What you need will help you decide

If you need budget certainty then a ‘good’ fixed tariff may be best for you. If you’re not on a fixed tariff, your prices are dictated by the Energy Price Cap set by OFGEM every three months. The cap can go up or down, depending primarily on international gas prices.

For a household with typical usage, paying by Direct Debit, the price cap rose by10 percent on the 1^st October. So, a typical household will pay £1,717 a year for gas and electricity bills combined. Unfortunately though, that doesn’t mean your bill is capped, it only limits what energy supply companies can charge per unit of gas and electricity. The more you use, the higher your bill will be.

Energy costs could continue to rise

Energy bills are 65% higher than they were before Russia invaded Ukraine.

Energy bills are 65% higher than they were before Russia invaded Ukraine. With the war in the Middle East as well, geopolitical issues continue to keep fossil gas prices high.

Martin Lewis at Money Saving Expert is seen as the oracle for a lot of financial advice. Based on current predictions he says “If you find a fix for up to 2 per cent more than the new (Oct to Dec) Price Cap, it’s predicted you’ll save over the year compared with staying on the Price Cap.”

This link has all the details you need to see the one year deals that are currently available and it’s updated frequently as and when the market changes.

‘Fixed’ deals aren’t fixed for long

The majority of fixed deals only last twelve months too and while there are some options that will let you fix for longer, no one can predict whether these are worth it.

When it comes to switching or leaving longer fixes, the exit fees should be considered. The link above also has a ‘Should you fix?‘ energy calculator which will help you decide the best course of action.

If you don’t fix, you’ll be on the price cap and while we know firms can’t charge more than the price cap, they can charge less than that if they choose to.

Other options

Other issues to consider when switching is customer service and the energy supply company’s stance on the environment.

There are currently four variable tariffs which work out cheaper than the current price cap; EDF, E.on Next Pledge, Fuse Every and the Octopus Tariff Tracker.

There are also ‘time of use’ tariffs that let households make the most of cheaper off peak rates, if you have a smart meter. These allow you to charge your electric car at night or time the washing machine early in the morning when demand is lower on the grid. It also means you’ll be using less polluting energy as well so good for your wallet and the environment.

Other issues to consider when switching is customer service and the energy supply company’s stance on the environment. Some companies are head and shoulders above others in these two areas.

There’s no “one solution for everyone,” when it comes to answering this question, it depends entirely on circumstance, so it’s really worth doing your homework to see what will work best for you. And as always using less energy is the key to lower bills.

Reducing energy demand saves money

Removing draughts by plugging the gaps around windows and doors and insulating your loft and walls will all help cut costs and keep bills low now and in the future. To find out more about energy saving measures visit One Home’s guide.

Disclaimer

The information in this article was correct at the time of writing and is provided for guidance only. Please see the full disclaimer in our terms and conditions.

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