Should I fix my energy tariff?

Deciding whether to fix your energy tariff involves weighing price certainty against market fluctuations. Fixed tariffs lock in your unit rates and standing charges for a set period, typically 12 to 18 months, offering predictability for budgeting. Variable tariffs, conversely, change quarterly in line with the Ofgem energy price cap, meaning your rates can go up or down.

Considering a fixed tariff to manage your energy costs? Fuse Energy offers clear pricing and a straightforward approach to energy supply, helping you make informed decisions for your home. Click here to see how easy it is to get started.

Understanding fixed vs variable energy tariffs

What is a fixed tariff?

A fixed energy tariff means the unit rate you pay for each kilowatt-hour (kWh) of electricity and gas, plus your daily standing charge, remains constant for the entire contract duration. These tariffs typically run for 12 to 18 months. This provides stability, shielding you from sudden price increases in the wholesale energy market. However, if wholesale prices fall, you will not benefit from lower rates until your fixed term ends. Fixed tariffs usually include exit fees if you decide to leave the contract early, outside specific regulatory windows.

What is a variable tariff?

A variable energy tariff, also known as a Standard Variable Tariff (SVT), has unit rates and standing charges that can change. These rates are primarily influenced by the Ofgem energy price cap, which is updated quarterly on 1 January, 1 April, 1 July, and 1 October. While variable tariffs offer flexibility with no exit fees, they expose you to market volatility; your bills could increase if the price cap rises.

Key differences and how they work

The fundamental difference lies in price stability. Fixed tariffs offer a predictable cost for your energy usage, making budgeting easier. Variable tariffs, while flexible, mean your energy costs can fluctuate with market conditions and the price cap. The energy price cap sets a maximum unit rate and standing charge for variable tariffs, but it is not a cap on your total energy bill; your bill will still depend on how much energy you use.

Pros and cons of fixing your energy tariff

Benefits of price certainty

The primary advantage of a fixed tariff is the peace of mind that comes with knowing your energy unit rates and standing charges will not change for the contract's duration. This predictability is invaluable for household budgeting, allowing you to plan your finances without the worry of unexpected energy bill hikes. It can also protect you if wholesale energy prices, and subsequently the price cap, rise significantly.

Potential drawbacks and risks

Fixing your tariff is not without its risks. If wholesale energy prices drop, variable tariffs might become cheaper than your fixed rate, meaning you could end up paying more than necessary. Additionally, if you need to switch suppliers or tariffs before your contract ends, you might incur exit fees. It is crucial to consider the current market outlook and forecasts before committing to a fixed deal.

Considering exit fees and contract lengths

Exit fees are a key consideration for fixed tariffs. These charges apply if you leave your contract before its end date, unless you are within the first 14 days (cooling-off period) or the final 49 days of your contract term. If you move home and take your Fuse tariff with you, no exit fee applies. However, if you move and do not switch to Fuse at your new property, the standard exit fee applies if you are outside the cooling-off and final 49-day windows.

The current UK energy market landscape

The role of the energy price cap

Ofgem, the UK's energy regulator, sets the energy price cap. This cap limits the maximum unit rates and standing charges that suppliers can charge for their SVTs. It is reviewed and updated quarterly, influencing the cost of energy for millions of households. For example, Ofgem announced the energy price cap will rise by 13% from 1 July 2026, with gas prices set to increase by approximately 24% and electricity prices by around 5% within the cap.

Wholesale energy price trends

Wholesale energy prices are a major driver of the energy price cap. These prices are influenced by global supply and demand, geopolitical events, and even weather patterns. Understanding these trends is crucial, as sustained periods of high wholesale prices often lead to increases in the price cap, making fixed tariffs more appealing. Conversely, falling wholesale prices can make variable tariffs more competitive.

Market forecasts and volatility

The energy market can be volatile, making it challenging to predict future price movements with certainty. Reputable sources often provide forecasts, but these are estimates and not guarantees. For instance, according to Ofgem's typical domestic consumption values (TDCV), the average UK home uses around 2,500 kWh of electricity per year and 9,500 kWh of gas per year. This baseline usage helps in understanding the potential impact of tariff changes on your overall bill.

Factors to consider when deciding to fix

Your household's energy usage

Your household's energy consumption plays a significant role in your decision. If you have high and consistent energy usage, the certainty of a fixed tariff might be more beneficial for budgeting. Conversely, if your usage is low or fluctuates significantly, the flexibility of a variable tariff might be more suitable, especially if you anticipate being able to reduce consumption during periods of high prices.

Your financial risk tolerance

Consider your comfort level with financial risk. If you prefer stability and want to avoid potential price hikes, a fixed tariff offers that security. If you are comfortable with some level of risk and are prepared to monitor market trends, a variable tariff might allow you to benefit from potential price drops.

Comparing available deals

When comparing fixed and variable tariffs, look beyond just the headline unit rates. Pay close attention to the daily standing charges, the contract length, and any associated exit fees. A seemingly lower unit rate on a fixed tariff might be offset by a higher standing charge or a substantial exit fee. Use comparison tools to evaluate the total potential cost based on your estimated usage.

Making an informed choice for your home

Steps to evaluate your options

Making an informed decision requires a systematic approach. First, assess your current energy usage and household budget. Next, research the latest energy market outlook and price forecasts from trusted sources. Then, compare the available fixed and variable tariff options, scrutinising unit rates, standing charges, and exit fees. Finally, consider your personal financial risk tolerance and desire for price predictability to make a choice that aligns with your needs.

What happens when your fixed term ends

As your fixed tariff approaches its end, your energy supplier will contact you with options, typically around 49 days before the contract concludes. This is a crucial time to re-evaluate your energy needs and market conditions. You can switch to a new fixed tariff, move to a variable tariff, or switch to a different supplier. During the final 49 days of your contract, you can switch without incurring any exit fees.

Getting support with your energy decisions

Navigating the complexities of energy tariffs can be challenging. If you need clarity or guidance on making these decisions, support is available. Fuse Energy offers 24/7 human customer support to help customers understand their options and manage their energy supply with confidence. This support can be invaluable in making a choice that secures financial certainty and control over your household energy costs.

Making the right energy tariff choice can significantly impact your household budget. Fuse Energy is committed to providing clear, transparent pricing and excellent customer support to help you manage your energy effectively. Our online sign-up process is quick and easy, allowing you to take control of your energy bills today. Find out more about our mission to make energy abundant and affordable by clicking here. Ready to switch? Click here to join Fuse Energy.