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Don’t know your variable tariff from your duel fuel? Our tariff guide explains all...

Robin Bowman

Robin Bowman
Dec 5, 2016


It’s crucial to get the cheapest deal you can on energy. But it’s just as important to make sure you’re on the right tariff. 

And the variety of choice has never been greater. 

When you compare energy prices online, the number of terms - dual fuel, variable, fixed rate, online-only, prepayment - can be daunting 

Here’s quick guide to help you understand what’s what when it comes to tariff.

 

What is standard variable-rate?

These do what they say on the tin – they can change price, up or down. Guess which direction they tend to move most!

This is a company’s default rate and the one you’ll go on to when a fixed rate ends if you do nothing. They sometimes refer to them as their ‘Evergreen’ price.

But they are usually one of the worst prices offered by a supplier – that’s why the hundreds of thousands of customers who don’t bother to switch and end up on this tariff with their supplier end up paying through the nose. 

The Competition and Markets Authority estimates a staggering £1.7 billion a year is wasted by 70% of energy customers who pay standard variable tariffs with the Big Six – about £300 per average customer.

When a fixed deal comes to an end, act! Do not let yourself be moved to a standard rate by default. Energy companies have to let you know your deal is ending, but too many people ignore the communication. Don’t be one of them.

One advantage this tariff does have is that it is flexible, in that you can leave it at anytime without penalty.

We suggest you do!

Bear in mind, too, that when energy companies talk about freezing prices or cutting them, they are talking only about their standard variable tariff, a rate that will only rarely be able to compete with the best tariffs you’ll find by shopping around.

If you or anyone in your family is on one of these tariffs, or is close to being moved to one, compare prices now

 

Fixed deals explained

This deal offers a price fix for the length of the deal, which is most often 12 months, but can be two, even three years.

The price of energy and any standing charges are both fixed, so you know exactly what price you’ll have to pay – how much you have to pay will obviously depend on the amount of energy you use. 

Fixes are great if you prefer not to have nasty surprises, but, of course, if wholesale energy prices fall during the period of your fix you won’t get the benefit of any price cut by your supplier.

So, just like a fixed mortgage, fixed energy tariffs offer the best deals to the consumer when prices are on the rise.

Like now!

Get in early and lock the price you pay.

The negative is that, in return for certainty, you may be faced with an exit fee if you decide to switch to a new supplier before your contract ends.

This doesn’t mean you shouldn’t regularly check the market, though. Because the savings you make by switching may vastly overshadow any charge you face for an early exit. Comparing the two figures is dead easy, so long as you know what the exit fee is.

One note of warning – most of the people on the most expensive standard variable-rate tariffs who could save over £300 a year on average, according to the Competition and Markets Authority, are paying over the odds because their fixed rate tariff ended.

And they did nothing!  

It’s easy to be complacent and just let the months go by, forgetting you could be saving hundreds of pound by carrying out a simple price comparison and switch.

Worth knowing – under Ofgem rules, if you switch between 42 and 49 days before your fixed deal ends, you can’t be charged an exit fee.

 

What does Dual fuel mean?

This is a tariff set if you buy your gas and electricity from the same supplier.

It can often mean significant savings and also makes admin simpler.

Like a fixed rate deal, this tariff will be fixed, but there will be an extra discount for opting for both fuels.

Two things to keep in mind, though.

First, just because there’s a ‘discount’ it doesn’t mean this is the best deal out there. The discount might be less attractive than having your gas and electricity supplied under two separate deals with different companies. Just run the numbers.

And, second, there will probably be an early exit fee if you switch suppliers for either electricity or gas before the contract has run its course.

Again, the penalty for leaving early may not be anything like the savings you could make by switching, so carry out regular comparisons to ensure you have the right deal.

 

Understanding online energy tariffs

These are packages that you manage entirely online.

The fact that admin is minimal for the energy company means prices are usually discounted.

But, once again, a discount doesn’t mean they offer the best deal.

You’ll do all the meter readings and enter them into your account online and bills will be sent via links in an email or as attachments.

There may be an early exit fee as the deal will be a fixed one, but this will vary according to the specific deal.

Watch out for the fact that you will only receive correspondence via email, especially important is the message telling you a fixed tariff is ending. If you don’t shop around and switch, you’ll automatically go on to an expensive standard variable price.

 

What are Pre-Payments?

You pay for your energy use upfront, by adding credit to a card or buying tokens.

For some customers this arrangement may be convenient, for others it may be the only way they can have their energy supplied, either because they are in rented accommodation or they have no or a bad credit history.

Either way, they hardly ever offer the best deals.

This is an expensive way to buy energy. Full stop.

You may also be charged a fee to leave if you have a fixed term contract.

If you are limited to pre-paying, it is still very important to shop around for the best deals as there is still competition between suppliers, just nothing like as much as in the rest of the market.

 

Find a green energy tariff

A green tariff can either be one in which the supplier agrees to match your usage with energy produced by renewables or a tariff in which the supplier agrees to pay a contribution towards environmentally friendly schemes.

You may be charged an early exit fee, but this will depend on the terms of your contract. 

Almost all green tariffs will work out more expensive than the best of the fixed deals on the market. So, tariffs in this sector of the market are usually for those who want to do their bit to help the environment, and who don’t mind paying a little extra do so.

To work out just how green the supplier is, search the company's name then fuel mix into Google, e.g British Gas Fuel Mix; under Ofgem rules, suppliers must publish their fuel mix disclosure explaining exactly where they get fuel from.