The ongoing cost-of-living crisis has had a devastating effect on the gas and electricity markets in the UK, greatly affecting suppliers' ability to offer affordable fixed energy tariffs. Currently, there are no fixed deals available that are cheaper than the Government’s Energy Price Guarantee (EPG) of £2,500/year for a typical household.
But from July 1 2023, the default energy price cap from Ofgem will replace the EPG, with typical household prices falling to £2,074 per year. It’s at this time that competition amongst energy suppliers offering more affordable fixed tariffs is expected to return.
Here we explain what fixed rate tariffs are, how they work, and what it means for your bills should you decide to switch to one.
What is a fixed energy tariff?
A fixed tariff, also known as a fixed deal, fixed-rate energy deal or fixed plan, means that the unit price and standing charges you pay for gas and electricity will remain the same for the length of your contract. If you are not on a fixed deal, you will be on your supplier's standard variable tariff (SVT), meaning that what you pay for your gas and electricity can go up or down at any time, depending on the volatility or stability of the market.
Fixed deals most commonly last for 12 months, but some suppliers will offer longer-term deals, up to 24 months.
When signing up for a fixed energy tariff, you can choose ‘dual fuel’, which means both your gas and electricity comes from the same supplier – or you can choose to get your gas and electricity from separate suppliers. Generally, choosing a single energy supplier Is less hassle.
What am I charged for on a fixed energy tariff?
Your costs for each fuel (gas or electricity) are made up of two elements:
Each unit of gas and electricity is measured in kilowatt hours (kWh) and the cost per unit is expressed in pence per kWh. On a fixed tariff, the price you pay for each unit will be the same for the duration of your deal.
A fixed cost you pay for energy to be supplied to your home and to stay connected to the electricity grid or mains gas network. The standing charge Is also expressed In pence per day.
Remember – although the cost per unit rate and standing charge is fixed, your energy bill is not. How much you pay per month is based on how much energy you use. It is calculated by multiplying the unit rates of gas and electricity by the amount you’ve used, plus the daily standing charge.
I’m on a fixed energy tariff and pay by direct debit. Why has my monthly bill gone up?
When you first switch to a fixed energy tariff with a new supplier and pay by monthly direct debit, the energy company will usually estimate your annual usage and charge you 1/12 of this amount each month, even though most people use a lot more energy in winter. And, although being on a fixed tariff means that the unit rate and standing charge won’t change, the monthly direct debit amount can be changed by your supplier if your actual usage is not in line with the estimates made when you first switched.
If you don’t have a smart meter - which will send automatic readings to your supplier at least once a month - try and take regular meter readings to send to your supplier. This will help you keep an eye on your energy consumption and ensure you are being charged correctly for what you use.
If you feel that your supplier has increased your direct debit unfairly, you can challenge it. Ask your supplier how they calculated the new amount. They must explain clearly how they reached the figure they want to charge and give you the meter readings they used. Find your energy supplier’s contact details.
What happens to my fixed deal if my supplier goes bust?
If your supplier goes bust while you’re on a fixed deal, you will be transferred to a new supplier under Ofgem’s Supplier of Last Resort (SoLR) process.
Through the SoLR process, your new supplier will be chosen by Ofgem from a pool of energy providers who have put themselves forward for the role. Ofgem selects a new supplier based on certain criteria, including whether the new supplier can continue to provide its existing customers with gas and electricity as well as supplying the influx of additional customers.
If you were on a fixed deal with your previous supplier, this will not transfer over to the SoLR. Instead, you will be placed on a “deemed contract” with your new supplier.
What is a deemed contract?
If you’re assigned a new supplier under the SoLR process, you will be placed on a deemed contract. This is not a tariff, but a temporary rate you will be charged by your new supplier for your gas and electricity. The rate is usually the same as the Standard Variable tariff offered by that supplier, meaning your unit rates and daily standing charges can go up or down depending on fluctuations on the market.
You will stay on the deemed contract rate for a maximum period of six months, or until you either agree a new fixed rate tariff with your new supplier or switch to another supplier of your choice, whichever is earlier.
What can I do to try to make sure my monthly energy bill stays the same?
The best thing to do if you’re on a fixed tariff is speak to your supplier to confirm that your monthly payments are set at a sensible level to cover your estimated annual usage.
It’s also worth keeping an eye on your readings to track how much you’re using each month. If you notice particular times when you have a spike in usage, making certain adjustments during these periods can help ensure your bills remain consistent.
What are the advantages of a fixed energy tariff?
Signing-up for a fixed energy deal provides financial stability, allowing you to budget your monthly expenditures for at least a year.
Suppliers are competing to attract customers by offering the best prices, which they do through offering fixed energy tariffs.
What are the disadvantages of a fixed energy tariff?
If wholesale energy prices decrease while you’re mid-contract, you may end up paying above the going rate for your gas and electricity.
Remember – you can leave your contract early, but if it is not within 49 days of the end of your contract, you may be subject to early termination charges.
Keep an eye on your tariff end date
When you sign up for a fixed energy deal, it will only be for a certain amount of time, usually 12 or 24 months. Once your deal expires, , you’ll automatically be rolled onto your supplier’s standard variable rate, which is often a lot more expensive.
How can I find out when my fixed energy deal ends?
There are a few ways you can find out when your tariff is due to expire. These include:
Checking your latest energy bill
If you’re currently on a fixed deal, the end date will be printed on your bill. It will also have details such as the name of the tariff you’re on and your account number.
Call your energy provider
If you can’t locate a copy of a recent energy bill, call your supplier. They will be able to provide details of your tariff, including its end date.
You will receive an end of tariff notification from your suppliers
Under Ofgem regulations, all energy suppliers are now legally obligated to notify their customers when their tariff is coming to an end. This notification should arrive between 42 and 49 days prior to your tariff expiring. If you switch suppliers during this period, you will not be charged any exit fees.
Can I switch energy suppliers before my tariff end date?
If you find a better deal elsewhere and want to leave your current deal before it expires, most suppliers will charge an exit fee.
Previously, these fees were anywhere between £5 - £30 per fuel, but the increase in wholesale energy prices has seen exit fees increase in excess of £100 per fuel.
According to data released in June 2022 by Martin Lewis’ Money Saving Expert, energy supplier Outfox the Market was charging the most in early exit fees - £600 for its 12-month fixed deals – up from £0 and £67 on its deals offered the previous year in 2021.
However, under Ofgem rules, you can switch within 49 days of your deal ending and you will not be charged any exit fees.
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