Energy Tariffs Explained

Here’s our easy guide to energy tariffs to help you navigate your way to a better deal.

There’s a lot of information on your gas and electricity bill. You probably focus in on the amount you need to pay and when, but the most crucial piece of information in there is the tariff you’re on. This important detail decides how much you pay per unit of energy. If it’s not best suited to your needs you may be paying more than you need too.

Standard (or variable) tariff

Many suppliers put you on this deal as a default but it usually doesn’t accommodate for individual circumstances. You may also find yourself on this type of deal if you signed up for a fixed-term contract that has since expired.

In their favour, they are usually flexible and you won’t be charged for switching supplier. On the downside, the rates are variable so can change at any time and you probably won’t be getting the best rate.

Fixed rate tariffs

This type of tariff is good if you would like some certainty about how much you’ll pay for your energy. Rates are guaranteed, or fixed, for a set period of time – often 12 or 18 months. The pros are that you usually get a good rate, and you can plan your expenses, but the cons are that these deals are inflexible and you may be charged (usually about £30) for changing suppliers before the end of the contract. Once the deal expires you are free to move as you wish.

Capped tariff

This arrangement is somewhere in between fixed and variable. Your unit price can change but it won’t go over the amount set as the cap. This is in your favour as you can benefit from drops in prices but you’ll feel the hit if your price goes up. Like fixed price rates you may be charged to exit a capped tariff before the end of a set term. You probably won’t get the most competitive price from this deal.

Dual fuel tariff

If you’re happy to accept both gas and electricity from the same supplier then you may be able to get a dual fuel discount on your bill. This is useful as you have less admin to deal with but, even with the same supplier, you’re not guaranteed the best deal. It’s worth checking that the discount you get for your loyal custom isn’t cancelled out by bigger bills than necessary. You need to watch out for exit fees on this package too.

Online tariff

Managing your account online can be an easy way to get a discount. This works because the energy company makes a saving by having you do the leg work on looking after your account and they pass this on to you in lower prices. These are often the cheapest option but you’ll need to check your own bills, submit your own readings and be computer-savvy. You won’t get any paper bills this way (though you can always print your electronic ones if you need them) and your communication with your supplier will be via email or online chat.

Green tariff

If environmental concerns are an important part of your decision-making then you could consider a green tariff which runs off renewable energy. This might mean that your own energy use is offset with renewable-sourced energy being pushed back into the grid, or your supply might come from green sources.

This is an increasingly popular option and the number of eco-friendly suppliers is increasing. However, this type of arrangement may come with a slightly higher price than traditional deals. If your impact on the environment is a consideration for you then it’s a balance you need to strike.

Tariffs based on when you use your energy

You probably recognise these deals as Economy 7 or Economy 10 tariffs. This means you get a reduced unit rate for a set period of either seven or ten hours. Economy 7 covers the night time hours from midnight until 7am while the longer deal is spread out for short periods throughout the day.

This sounds like a good deal, but when was the last time you did the ironing in the middle of the night? It’s handy if you are good with setting delay timers on your appliances but if you find you need lots of energy during the day you’ll suffer from a fairly high rate for this usage. It really comes down to whether you can adapt your way of living to take advantage of the lower rates. Think carefully before signing up.

Pre-payment tariffs

Paying for your energy in advance means you don’t have to worry about bills and you always know how much you’re spending. The technology behind this arrangement has improved significantly in recent years and you can top up your supplies online (though the old-school cards or tokens are still in play). This method offers a lot of convenience but not so much in value. You may find you’re paying over the odds.

Feed in tariffs

These deals are for people that have their own solar panels or turbines. This deal works by taking any extra energy these sources in your home produce and pushing it back into the grid for others to take advantage off. Your supplier then pays you for the amount other people have benefitted from.

The theory behind this is financially and environmentally sound but you need to play it off against the initial investment in the equipment. It usually takes around eight years for your personal renewable energy sources to pay for themselves, although you may be able to get a government grant to cover some of the initial cost. You probably won’t make a profit on your energy production but you may get a reduced bill.

So, there are your options in a nutshell. Now you’re in the know search for a cheap energy deal using our easy online energy comparison tool.