Gas and Electricity Tariffs Explained
Gas and electricity tariffs can be tricky to decipher. Most homeowners will usually stick to the existing supplier and “standard” tariff when they move house and cross “energy” off the to-do list. Sorted, right? Well, maybe not. Our guide to gas and electricity tariffs will break down and show you what other tariff options are out there.
Energy tariffs explained
An energy tariff is simply how an energy provider charges you for your gas and electricity. It could also be described as an energy plan or package, similar to how mobile phone networks divide their services. There are many kinds of energy tariffs on the market, usually under different snazzy names; however, the most common types are fixed rate and variable tariffs.
Best energy tariffs
Choosing a tariff for your household can come down to several factors including simplicity, price, energy use or the type of meters your property supports. Have a read below and find a match for your home.
Fixed rate tariffs (or fixed rate plans) can be a little tricky to understand. The part of the tariff that’s “fixed” is the cost per unit of gas and electricity, not your final bill. If unit prices go up or down, your price for each unit of energy consumed will stay the same. How many units you use, and therefore the price of your bill, depends on you. Fixed rate tariffs usually last for 12 to 18 months with an exit fee applicable if you leave the contract before the period is up.
Variable tariffs can, on the surface, be very cheap, but they operate at the mercy of the energy markets. Unit prices can fall further, which is excellent news for households, but at the same time, can also rise. If you’re okay with the unpredictability of energy unit costs, then a variable tariff is a great option to take. Whereas if you need to budget your energy spend, a fixed rate tariff will provide more security in the long term.
Standard variable tariffs
If your contract comes to an end, your energy supply doesn’t just suddenly stop. Instead, you’ll be moved on to a standard variable tariff if you haven’t made plans to renew it. You’ll also be on a standard variable tariff if an energy company ceases trading and Ofgem assigns you another supplier. This will also be the case if you’ve just moved home. While standard variable tariffs can be costly, there are usually no exit fees involved so you should switch tariffs as soon as possible.
Capped energy tariffs
With a capped tariff the price per energy unit can rise and fall along with the market, but there will be an upper cap limit. This means you can set the limit on the amount you’re prepared to pay. If energy unit rates rise, your bill won’t exceed your set cap, but you could pay less if the cost of your energy goes down. These tariffs are great for businesses where costs for energy might have to be part of an estimated budget plan to allocate resources elsewhere. The downside to a capped tariff is there might be an early exit penalty involved for cancelling your contract.
Unlimited energy tariffs
Unlimited tariffs are the exciting, new offering in the energy scene but they can come with strings attached. On one hand, they’re great if you want a hassle-free, one-time fee for your energy contract. However, if you start to use less energy, you’ll end up paying over the odds for your gas and electricity. For example, if during your tariff, you start to use energy-efficient appliances or you install insulation, it could mean your energy consumption reduces suddenly and you’ll end up paying more for less.
Dual energy tariffs
Dual energy (or dual fuel tariffs) are pretty straightforward. They are tariffs where your gas and electricity are provided by the same company. Doing this can sometimes mean you get a discount on the cost, so it is worth considering when comparing quotes. It can also mean less stress by dealing with just one supplier rather than two separate companies and customer service teams.
Prepayment meter tariffs
A prepayment (or prepay meter) meter allows you to operate your gas and electricity on a ‘pay as you go’ style tariff. With a prepay meter, you pay for your energy before you use it. You can usually top it up using tokens or a ‘key’. The downside is when they run out, that’s that, and this can happen at almost any time. It goes without saying, but with a prepayment meter, it requires more monitoring than any other type of meter. We support all of these meter types and – even better – we're one of the only auto switching services that do.
Not as common but still available with many suppliers, a Feed-in Tariff (FIT) requires you to literally ‘feed-in’ to the National Grid by generating electricity at home through renewable sources such as solar panels. By “feeding” into the Grid, the government will pay you for the electricity you generate. This sort of tariff isn’t for everyone as your property will sometimes dictate if you're able to install renewable energy equipment. However, it’s an exciting route to pursue if you’re keen on reducing your carbon footprint. This tariff is not commonly available on most price comparison websites.
Online energy tariffs
With an online tariff, you manage your account solely online. And, in doing so, you can receive a discount. You’ll typically be able to give meter readings online, and billing will be paperless. In an internet-savvy and environment-conscious world, It’s an easy way to manage your energy account ethically while getting a discount too. Save on paper waste and save on your energy bills also.
Green energy tariffs
Green tariffs can work in one of two ways. The supplier will either contribute towards environmental schemes on your behalf or match your energy usage with energy generated from renewable sources. Either way, it’s a great way to do your bit for the environment as you consume energy. You might assume green tariffs are more expensive, but that’s not always necessarily the case, so it’s worth shopping around.
Switchcraft is a free auto switching service that scours the energy market for great gas and electricity deals. Signing up takes 3 minutes and after that, our technology automatically switches you to new deals each year. Save money on your bills without lifting a finger.