What are the difference between energy tariffs?

With so many energy tariffs on the market and changing prices, it can sometimes be confusing to know which to choose. In this guide, we break down exactly what each energy tariff means.

Key Takeaways

  • Energy tariffs, including variable and fixed rate plans, dictate how gas and electricity usage is charged by suppliers.
  • Fixed rate tariffs lock in unit prices for a set period, protecting from price increases, while variable rates can fluctuate with the market.
  • Other tariff types like dual fuel, prepayment, Economy 7, capped, and green energy tariffs cater to diverse consumer needs and preferences, offering various benefits and considerations.

What is an energy tariff?

An energy tariff is a price plan of how you are charged for your gas and electricity usage by your energy supplier. There are two main types of energy tariffs, these are variable and fixed rate tariffs. We go into more details about each one below.

Variable Rate Tariffs

A variable rate tariff means the price you pay per unit can go up or down. If prices all of a sudden drop, you will benefit from lower energy bills. However, you are fully exposed to market increase which can see your energy bill rise.

Fixed Price Energy Tariffs

As it says on the tin, these fixed energy tariffs offer a "fixed" unit rate meaning you continue to pay the same unit price for the duration of the tariff. That may be 12-months, 18-months or further out as defined by the energy tariff you apply for. However, please note that once your "fixed" tariff expires, you will automatically be placed on your existing supplier's "Standard Variable" rate tariff. As such, it's essential you make a note of your expiry date, compare energy prices and switch to an alternative tariff to keep your bills low. NOTE: Doing this too early can result in an "early exit fee" which could be as high as £50 per fuel.

Dual Fuel Tariffs

A dual fuel tariff is simply an energy tariff that covers you for both your gas and electricity. This means your bill is with one supplier on one tariff. The alternative to this is having two single fuel tariffs - one for your electricity and one for your gas.

Prepayment Energy Tariffs

The "Pay As You Go" of the energy market. Usually topped up with a key or a token at a local shop, this is a meter which requires you to put a balance on to the prepayment meter to cover your energy costs. Due to the maintenance of these meters, they usually carry a high unit price than "standard credit meters". Once the balance expires (as can be viewed digitally on the meter itself), you run the risk of losing power although you do get an emergency button to cover you for a short-period of time of perhaps £5.

Economy 7 Energy Tariffs

A great option for those working shifts, who have an electric vehicle and who can set their appliances to work at set times. That's because these Economy 7 tariffs offer cheap "off peak" unit prices when the grid is quiet through the night meaning huge savings can be made if you can utilise this cheap energy. Properties with an immersion heater to heat their hot water system can also benefit from an Economy 7 (E7) meter meaning they can heat their tank during the night for potentially 50% less than it would be during the day giving them cheap hot water.

Capped Energy Tariffs

This means your energy bill can come down but is locked at a certain limit on the way up meaning the price it can move up to is "capped". Let's be honest, we're all fine with our energy bills going down but nobody wants to see them go up and end up seeing their energy bills increase.

Green Energy Tariffs

Growing in popularity and demand, green energy tariffs are linked to renewable energy meaning the energy generated for them is done so through renewable means such as hydro (water), wind or solar to name a few. These tariffs can often carry a premium due to the cost of green energy but this is reducing as efficiencies are found in generating renewable energy.

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