A Guide To Help You Understand Fixed-Price Energy Tariffs

January 18, 2022 Mary

Choosing fixed-price energy tariffs allow you to lock in the price of the energy that you utilize in your business for a specific period. This means you don’t need to think about fluctuations in the energy supplier’s unit energy price, and spending more than you wanted. Fixed price energy deals usually run between 12 and 24 months, though you can find others that can go up to three years.

A good alternative to fixed-price energy tariffs are standard variable rate tariffs. The cost of a standard variable rate tariff can fluctuate depending on wider market energy costs. While a standard variable deal doesn’t tie you in, it’s not an affordable way to purchase gas and electricity for your business. This guide will help you understand fixed-price energy tariffs.

Understanding fixed energy tariffs

A fixed-price energy tariff guarantees that the standing charge as well as your unit cost of electricity and gas which usually makes up your total energy bill cannot change during the length of the energy contract. But this doesn’t imply that you can pay the same for the energy bill each month.

Instead, it’s the cost of your energy unit that doesn’t change. Therefore, if you choose a fixed energy plan and utilize less or more energy each month than another, then your energy bill can change accordingly.

A fixed-price tariff provides the benefit of a locked price and competitive market rates. It’s usually appealing to those who want a short-term or medium-term way of budgeting on energy bills.

In most cases, a fixed-price energy can sometimes be a bit expensive compared to a variable-rate tariff, especially if you have an energy deal that runs for 18 months or more. Remember that a fixed-price energy plan attracts an exit fee that is payable once you decide to switch tariffs before the expiry of the energy contract. The energy supplier may not charge this fee if you are within a couple of days before the expiry of the contract.

A fixed-rate energy tariff can be cheaper than a variable rate tariff, but this can depend on the wider energy market. For example, if wholesale prices for energy are high, then a fixed-rate energy deal can cost you more. However, it can be a good idea to consider it as worth the money because they provide a guarantee that the unit energy cost cannot change.

Fixing the cost of your energy can mean paying less energy bills. But a fixed-price energy tariff is usually available for property owners who install smart meters on their property.

A smart meter makes sure that you only need to pay the same amount for the energy you use. You should note that a smart meter can communicate wirelessly with the energy supplier, so you don’t have to send meter readings yourself.

The expiry of fixed-price energy contract

Your energy supplier needs to give you advance notice before the expiry of your fixed-price energy contract. But it’s also a good idea to take note of the expiry date of your fixed-price electric and gas tariff.

When your fixed-rate energy tariff expires, it can go back to your energy supplier’s default tariff. This standard default tariff is a standard variable rate that can be expensive compared to the fixed-rate that you were previously paying. Remembering the expiry date of the fixed-price energy contract can give you enough time and options of looking for the best energy deal with the current energy supplier or a different energy supplier.

You can consider switching a fixed-rate energy tariff at any time, especially if you find a better energy deal. Energy prices usually increase in winter, so make sure that you compare energy deals before winter sets in to find the best offers.

On the other hand, if you already have a fixed energy tariff, then you should find out if the current energy supplier charges an exit fee for leaving your energy tariff before the expiry of the contract. You should also check if the savings you made on the new tariff can make up for this cost. Also, ask your energy supplier the expiry date of your energy contract, especially if you are not sure.

It’s simple to switch to a fixed-rate tariff. The best way is to visit a comparison site like Utility Bidder and enter a couple of details about your energy supplier, tariff, and energy usage to get the cheapest energy deals.

Keep in mind that energy suppliers have the energy price cap. This cap limits how much energy these energy suppliers can charge you for units of gas and electricity for consumers on the standard variable rate. It’s usually shown as an annual figure, so it’s the maximum amount an average family can pay if they utilized the average amount of energy.

It’s worth mentioning that you can decide to switch a tariff if you have a prepayment meter. Therefore, you can use energy comparison services to get more competitive prepayment tariffs. This is how it works: you can tell an energy comparison service provider about your property and energy usage, and they can give you several energy tariffs to choose from.

Alternatively, you can decide to switch from a prepayment tariff to a credit meter. Credit tariffs can usually be cheaper than prepayment tariffs. Hence, you need to ask your energy supplier if it can switch meters on your behalf. There is a good chance that the savings you can make by switching may be more than the cost.

But if your credit history is poor, then your energy supplier can need you to be on a prepayment tariff. And, if you are renting the property, you need to speak with the landlord about switching the energy tariffs.

In conclusion, there is a wide range of fixed-rate tariffs that have competitive prices. A fixed tariff is affordable to make it a popular option for many business owners. The good thing about a fixed tariff is also that the price per unit of energy can be locked for at least 12 months or 24 months. This means you have price security during the run of your energy contract.