What is a fixed energy tariff?

A fixed energy tariff locks in the unit rate you pay for electricity and gas, along with your daily standing charge, for a set contract period. This means the price you pay per unit of energy and your daily charge remain constant, regardless of market fluctuations, for the duration of your agreement.

Understanding fixed energy tariffs helps you budget better. Fuse Energy offers clear pricing and tools to manage your energy, making it easier to take control of your bills. Click here to switch to Fuse Energy today.

Understanding fixed energy tariffs

Fixed tariffs are designed to offer predictability in your energy costs. They contrast with variable tariffs, where unit rates and standing charges can change. For many households, this stability is a key factor in managing budgets in a volatile energy market.

How fixed tariffs work

When you sign up for a fixed energy tariff, your energy supplier agrees to provide electricity and/or gas at a specific unit rate (pence per kilowatt-hour, or kWh) and a daily standing charge for a predetermined contract length. This period typically ranges between 12 and 18 months. All tariff rates (unit rates and standing charges) are quoted inclusive of VAT at 5% for domestic customers. This means that even if wholesale energy prices fluctuate, your per-unit cost remains the same.

Fixed vs variable tariffs

The main difference lies in price stability.

• Fixed tariffs: Your unit rates and standing charges are locked in for the contract duration, offering predictable bills.
• Variable tariffs: Your unit rates and standing charges can change, typically quarterly, in line with the energy price cap set by Ofgem.

Benefits of a fixed energy tariff

Choosing a fixed energy tariff can offer several advantages for UK residential customers:

• Budgeting certainty: Knowing exactly what you will pay per unit of energy helps you forecast your monthly and annual energy expenditure, making budgeting simpler and more reliable.
• Protection from price rises: If wholesale energy prices increase, your fixed tariff protects you from these rises, ensuring your costs remain stable.
• Peace of mind: The stability of a fixed tariff can reduce anxiety about fluctuating energy bills, allowing you to manage your household finances with greater confidence. This financial stability can also free up resources to consider other home energy improvements, such as an air source heat pump installation or improving air conditioning efficiency.

Drawbacks of a fixed energy tariff

While fixed tariffs offer stability, they also come with potential downsides:

• Missing out on price drops: If wholesale energy prices fall significantly, you will not benefit from lower rates until your fixed contract ends.
• Exit fees: Most fixed tariffs include exit fees if you leave the contract early. However, you can usually switch from a fixed tariff without exit fees if your contract ends within 49 days.
• Higher initial cost: Fixed tariffs can sometimes be more expensive than the current variable tariff rates when you sign up, as suppliers factor in future market volatility.

Is a fixed energy tariff right for you?

Deciding whether a fixed energy tariff is suitable depends on your priorities and tolerance for risk.

If budgeting stability and protection from potential price hikes are your main concerns, a fixed tariff could be a good choice. However, if you are prepared to monitor the market and switch frequently to take advantage of potential price drops, a variable tariff might offer more flexibility.

Always compare available tariffs, considering the contract length, unit rates, standing charges, and any associated exit fees, to find the best fit for your household's needs.

Managing your energy bills should be clear and easy to understand. Fuse Energy focuses on straightforward pricing, so you can see exactly what you are 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 do not 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.