Table of Contents
- Fixed and standard variable rate tariffs (SVTs) explained
- Why is an SVT typically more expensive?
- Why is the energy price cap important?
- Fixed tariffs: pros and cons
- What are the pros and cons of a standard variable tariff?
- Should I fix my energy prices?
- When can I leave my fixed rate contract?
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If you haven’t switched energy providers in two or three years, or have never done so, you will be on a standard variable rate “default” tariff that is highly likely to be more expensive when compared to many of the fixed rate tariffs available in the market.
But this doesn’t mean that a variable tariff should be ruled out completely when switching to a new provider – there are some competitive variable rate tariffs. And some people simply prefer not to be locked into a deal for a stated period.
Here’s everything you need to know about both types of tariff, and how to pick between the two.
Fixed and standard variable rate tariffs (SVTs) explained
There are two types of energy tariff:
- Fixed rate This type of tariff requires you pay a set price per unit of energy used for a contracted amount of time – usually 12 or 24 months. It doesn’t mean your bill will be fixed, though. The more energy you use, the more you pay – as always. You can have fixed rate deals for both gas and electricity.
- SVT or ‘default’ With this type of tariff, the provider can change the price-per-unit based on wholesale energy costs and other factors, which will have a direct impact on your bill.
Cheapest variable rate dual fuel tariffs
| Rank | Supplier | Tariff name | Cost | |||
|---|---|---|---|---|---|---|
| 1 | Utility Warehouse | Value | £1,538.83 | |||
Why is an SVT typically more expensive?
SVTs are usually priced at a higher rate than fixed rates. Energy companies use fixed rate deals to compete for business.
Customers who don’t switch will be on an SVT, either because that’s the tariff they’ve inherited from a previous user, or because they’ve been rolled onto a ‘default’ variable tariff once their fix has ended.
Why is the energy price cap important?
In a bid to minimise the negative impact of SVTs on consumers, the industry regulator, Ofgem maintains an energy price cap – a limit on the maximum amount providers can charge customers per unit of energy on an SVT or default tariff.
Based on wholesale energy costs, caps for SVT and prepayment meter energy prices are updated quaterly.
Energy providers can adjust their prices as close to the new cap as they wish each time.
Despite the existence of the cap, SVT prices are still substantially higher than most fixed rate tariffs, meaning those who do not switch to a fixed rate deal are likely paying more than they need to for their energy.
Cheapest fixed rate dual fuel tariffs
| Rank | Supplier | Tariff name | Cost | |||
|---|---|---|---|---|---|---|
| 1 | EDF | EDF Energy EDF Ensure Jul25 | £1,489.56 | |||
| 2 | Outfox the Market | Outfox the Market Super Fix'd 12m Jun-24 v3.0 | £1,588.02 | |||
| 3 | EDF | EDF Energy EDF Essentials 1Yr Jul25v2 | £1,644.75 | |||
| 4 | So Energy | So Energy So Poppy One Year - Green | £1,679.00 | |||
| 5 | 100 Green | 100Green Exclusive Spring 100% Green 24M | £1,896.20 | |||
| Cheapest deals based on dual fuel tariffs for an Ofgem-defined ‘medium user’, paying by monthly direct debit. Note, these may not be available in every region of the UK. Source: Uswitch, correct as of August 2024 | ||||||
Fixed tariffs: pros and cons
Here are the pros of fixed tariffs:
- Cheaper rates Your rate is usually priced competitively.
- Set rates Your rate per kilowatt-hour (kWh) – that’s the unit your energy usage is measured in for both electric and gas – will remain the same throughout your contracted term so you won’t have to worry about price rises.
- Easy to budget Set rates also mean you can organise your money more easily.
Here are the cons:
- Potential higher costs Fixed tariff rates only work out cheaper if wholesale prices don’t fall below them, subsequently making standard variable tariffs cheaper.
- Exit fees Unlike standard variable tariffs, you are contracted to keeping your tariff for a set term and may have to pay a fee for exiting early.
What are the pros and cons of a standard variable tariff?
According to Ofgem over half of the of UK households (53%) are on their supplier’s default/standard variable tariff.
Here are the pros of standard variable tariffs:
- Open-ended contract You are not contracted to stick to the tariff for a set term and are free to switch providers at any time.
- No exit fees If you decide to switch providers, you won’t have to pay an exit fee.
- Potential cheaper prices You could end up paying less than what you would on a fixed rate tariff depending on the wholesale market.
And here are the cons:
- Fluctuating prices Your rate could rise based on wholesale prices.
- Hard to budget It’s hard to plan ahead, not knowing how prices could change.
Should I fix my energy prices?
Whether you switch from a standard variable tariff to a fixed rate tariff should depend on your personal situation. Make sure to compare deals to find the best one for you. If you like to budget for the long-term, a fixed tariff would probably suit you better.
When can I leave my fixed rate contract?
Check with your provider whether you will have to pay an exit fee for terminating your contract early. If your next deal is quite a lot cheaper, it could be worth paying the exit fees.
Under Ofgem rules, you will not be charged to exit your contract within the last seven weeks of the contract term.
