If you’ve put off switching energy tariffs before because you’re baffled by the sheer amount of options available, don’t despair! Our handy guide to energy tariffs is here to shed some light on the situation.
The most important thing to know is that – despite various fancy account names from a growing number of suppliers – almost all accounts actually fit neatly into one of the broader types listed below. A second fact worth noting is that you are never instantly tied in when you switch. Whichever supplier or account you choose, you will have a 14-day cooling off period, during which time you are perfectly entitled to change your mind without penalty should you find a cheaper, greener or more flexible deal which better suits your needs.
So… with big savings to be made and enough breathing room to change your mind if you need to, what are you waiting for? It’s time to take a look at the options and get switching!
Energy tariffs explained:
Fixed rate tariffs
These are the preferred option for many households. A fixed rate tariff means that for the duration of your contract (often 12 or 18 months, but sometimes longer) you will always pay the same unit rate for your gas or electricity. The cost per unit cannot rise or fall, no matter what happens in the marketplace. For those that like to budget, this is a great option – and the unit price is usually really competitive too. Important things to check are:
- Whether you have to pay exit fees if you switch again before the end of the fixed rate period.
- What happens after the fixed rate period. If you are switched over to a standard variable rate (see below) it will be worth switching tariff/supplier again when your contract ends, to avoid higher charges.
Standard variable tariff
If you haven’t switched before, or have let your old deal roll over without contacting your energy supplier, the chances are you are on a tariff of this type. If you’ve ended up on a standard variable tariff, the bad news is you are probably paying more than you need to; as the default plan, these tariffs don’t usually offer a very competitive price per unit. The good news is this is a flexible plan; whilst this means that prices can go up and down (usually up), it also means that you are free to leave without incurring a cancellation fee. Our advice? Compare prices and move to a cheaper fixed rate deal with your supplier or a different one.
Capped energy tariff
Less popular than a fixed rate tariff, the capped energy tariff is also usually slightly more expensive per unit of energy. However, it has the potential to offer prices which reflect what is happening in the energy market by tracking the market down when prices decrease. Whilst prices can go up as well as down, they can never rise above the specified cap. Once again, it’s worth checking whether your chosen tariff comes with an exit fee should you decide to move before the contract period ends.
Time of use tariffs
If you have electric storage heaters in your house, it’s likely that you’ll be on a time of use deal. This type of tariff has two different rates, meaning it costs less to use energy during specific hours of the day. On a time of use tariff, it’s possible to reduce your energy bills by using more of your energy during ‘off peak’ hours. However, this won’t suit everyone and will require you to have a special meter fitted that allows usage to be monitored. Sometimes there is an additional charge for this. Economy 7 and Economy 10 are time of use tariffs which many people will have already heard of and which give you cheaper energy for seven or ten hours of the day respectively. The downside is that you’ll need to be disciplined/organised enough to use most of your energy during your specified off peak hours. Off peak hours may be less than half the standard price but peak hours are usually considerably more expensive per unit than on other tariffs.
For some households, a prepayment meter may be the best option. With this kind of account, you pay for energy up-front and can only use what you have paid for. The benefit is that you’ll never receive unexpected bills and this pay-as-you-go type of tariff allows you to budget for your energy use. Unfortunately, pre-payment tariffs can be more expensive per unit of energy than some other types of tariff so may not be the best option, despite them offering a clear way to avoid energy debt. A cap on prices for prepayment tariffs was introduced in April 2017 and could save households on these tariffs around 10 to 15% on their energy pills over a year, but other options, such as community energy schemes [link here to community energy article], may still provide a better alternative in the long run.
Added benefits on your energy tariff
Alongside the types of tariff explained above, any price comparison search will also show you tariffs which fit into these categories, but have an additional focus or benefit. Dual Fuel tariffs, for example, simply mean that you take both gas and electricity for the same provider and receive a discount for doing so. If you like the convenience of only having one bill and one supplier to contact with any queries, these types of tariff are perfect for you.
An online tariff will usually provide a cheap option for your energy and if you are happy to provide meter readings through an app or website and receive your bills electronically, this could be the right choice for you. However, only choose this type of tariff if you are comfortable managing your account online.
More and more suppliers are offering green energy tariffs. What this actually means will vary from one supplier to another, but if you are keen to know that your tariff supports renewable energy growth, this might be a good choice for you. Whilst not always the cheapest choice, green tariffs give you the chance to help invest in a sustainable energy system for the future.
If you opt for a dual fuel, online or green tariff, still be sure to check whether or not it is fixed rate and if any exit fees apply. Setting up a direct debit to pay monthly might also give you a discount, as well as making sure you don’t miss payments and helping you to spread the cost of winter bills across the whole year. One other important check worth doing, is how your chosen supplier rates for customer satisfaction – as inevitably you will need to contact them at some point and it’s reassuring to know that they have a good reputation for customer service!
One last thing – standing charges
Standing charges are a separate cost to the charge you see on your bill for units of energy used. It is a daily charge that is set by your contract and stays the same no matter how much or little energy you use. It covers the cost of the service provided by your supplier: maintaining your connection, meter readings and so on. It is possible to find deals with no standing charge but these usually have a higher price per unit of energy. The time to choose a deal with no standing charge is if you use very little energy, eg: because your home is unoccupied for long periods of time. Otherwise, expect to see a standing charge that will vary slightly from supplier to supplier, and tariff to tariff. Price comparison calculators are the best way to work out how the overall cost will vary. See ours here.
Help is available!
If you’re still not sure how to choose the best energy supplier, why not get in touch? Our energy team are here to help you find a deal that fits. We can talk you through the options which might suit you and help you to get the switching process started! For a visit from one of our team, please call 0121 374 0085.