What is a fixed energy tariff?

Fixed energy tariffs offer UK households control and predictability over their energy costs. This approach aligns with the idea of having "power to play with", allowing you to manage your energy expenses without constant worry about fluctuating bills. Understanding and choosing the right fixed tariff empowers you to make informed decisions about your energy usage and budget.

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Understanding fixed energy tariffs

What defines a fixed tariff?

A fixed energy tariff means the unit rate you pay for each kilowatt-hour (kWh) of electricity and/or gas, along with your daily standing charge, remains constant for the duration of your contract. This stability applies regardless of changes in the wholesale energy market. The price you pay per unit of energy consumed and your daily connection fee will not change.

How fixed price energy works

When you choose a fixed tariff, your energy supplier agrees to provide electricity and/or gas at a specific unit rate (pence per kWh) and a daily standing charge (pence per day) for a predetermined period. These rates are agreed upon at the start of your contract and do not fluctuate. While your total bill will still vary based on how much energy you use, the cost per unit remains consistent.

Fixed unit rates and standing charges

The two main components of your energy bill that are fixed are the unit rate and the standing charge. The unit rate is the cost for each kilowatt-hour (kWh) of energy you consume. The standing charge is a daily fee you pay regardless of how much energy you use. On a fixed tariff, both these elements are locked in for the contract term. Understanding how much energy appliances like an air source heat pump use can help you manage your bills.

Advantages of a fixed energy deal

Price certainty and budgeting

The primary advantage of a fixed energy deal is the price certainty it offers. By locking in your unit rates and standing charges, you know exactly what you'll pay per unit of energy for the entire contract period. This predictability makes budgeting easier, as you can forecast your energy expenses more accurately, reducing financial surprises.

Protection from market volatility

Fixed tariffs protect you from sudden price increases in the wholesale energy market. If wholesale costs rise during your contract, your rates remain unchanged, shielding you from higher bills. This can be a significant benefit in volatile energy markets, offering a sense of security.

Reducing energy anxiety

Knowing your energy costs are stable can significantly reduce anxiety about fluctuating bills. This peace of mind allows you to use the energy you need without constantly worrying about price changes. It aligns with the idea of having 'power to play with', giving you control over a significant household expense.

Disadvantages and risks of fixed tariffs

Missing out on price drops

While fixed tariffs protect against price rises, they also mean you won't benefit if wholesale energy prices fall significantly during your contract term. You'll continue to pay your agreed-upon fixed rate, which could end up being higher than new, lower variable rates available on the market.

Early exit fees explained

Most fixed tariffs include exit fees if you decide to switch supplier or tariff before your contract ends. These fees are tariff-specific and can vary between tariffs; the exact amount is shown at sign-up for your specific tariff. For illustrative purposes, an exit fee might be around £50 per fuel. Since Fuse Energy customers select electricity and gas tariffs separately, any applicable exit fees would apply to each fuel tariff. However, Ofgem rules state that you cannot be charged an exit fee in the final 49 days of your fixed term, allowing you to switch without penalty as your contract nears its end.

Contract length considerations

Fixed energy tariffs typically last between 12 and 18 months. Committing to a longer contract provides extended price certainty but also means you're locked into those rates for a longer period, potentially missing out on future price drops for an extended time. Consider your future plans, such as moving house, before committing to a longer fixed term.

Fixed vs variable energy tariffs

Key differences and implications

The fundamental difference between fixed and variable tariffs lies in how your unit rates and standing charges are determined. On a fixed tariff, these costs are locked in for the contract duration. Conversely, with a variable tariff (often a Standard Variable Tariff, or SVT), your unit rates and standing charges can go up or down, typically changing quarterly on 1 January, 1 April, 1 July, and 1 October in line with market conditions. Variable tariffs have no exit fees, offering greater flexibility.

Impact of Ofgem's price cap

Ofgem, the UK's energy regulator, sets a price cap that primarily affects variable tariffs. This cap limits the maximum amount suppliers can charge for each unit of gas and electricity on these tariffs, as well as the daily standing charge. Fixed-rate tariffs are not directly affected by the price cap; their rates are determined by the contract you sign, independent of the cap's fluctuations.

Choosing the right tariff type for you

Choosing between a fixed and variable tariff depends on your priorities. If budget certainty and protection from potential price rises are key, a fixed tariff might be suitable. If you prefer flexibility and believe prices might fall, a variable tariff could be more appealing. This flexibility might also be useful if you're considering major home improvements like an air conditioning installation that could change your energy consumption patterns. It's crucial to weigh the trade-offs between price stability and the potential to benefit from market dips.

How to choose the best fixed energy tariff

Comparing fixed deals and suppliers

Before committing to a fixed energy deal, compare offers from multiple suppliers. Look beyond just the headline price; consider the total estimated annual cost based on your actual energy usage. The average UK home uses around 2,500 kWh of electricity and 9,500 kWh of gas per year, according to Ofgem's typical domestic consumption values (TDCVs) effective from 1 July 2026. This can serve as a benchmark for comparison if you're unsure of your own usage. However, for the most accurate comparison, use your own consumption figures.

Reviewing terms and conditions

Always read the terms and conditions carefully before signing up for any fixed tariff. Pay close attention to the contract length, the exact unit rates and standing charges, and crucially, any early exit fees. Understanding these details will prevent unexpected costs if your circumstances change or if you wish to switch again.

When to consider a fixed rate energy deal

A fixed rate energy deal is worth considering if you value predictable bills and want to shield yourself from potential energy price increases. It's a strategic choice for control over your household finances, providing peace of mind.

Managing your energy bills should be clear and easy to understand. Fuse Energy focuses on straightforward pricing, so you can see exactly what you're paying without unnecessary complexity. If you have a smart meter, you can view detailed usage data through the app or website, helping you understand how you can lower your bills. If you don't have a smart meter, Fuse Energy can upgrade your non-smart meter, completely for free. This can make it easier to track spending and make informed decisions about your energy use. Our 24/7 human support team is always on hand with fast response times whenever you need help. Click here to switch to Fuse Energy today. Find out about our mission by clicking here.