Fixed vs Variable Energy Tariffs: Which Is Better for You?
THE QUICK ANSWER
A fixed tariff may suit you if you value more certainty about your unit rates and standing charges for an agreed period. A variable tariff may suit you if you prefer flexibility and are comfortable with prices moving up or down. Neither option guarantees the lowest total bill: your usage, tariff rates, standing charges, contract terms and future market changes all matter.
What is the difference between fixed and variable tariffs?
The main difference is what can happen to the rates you are charged. On a fixed tariff, the unit rates and standing charges are normally set for the fixed term. On a variable tariff, those rates can change.
This does not mean a fixed tariff fixes your total bill. You still pay for the gas and electricity you use, so a cold winter, a larger household or increased appliance use can raise the amount you owe. The word 'fixed' relates to the tariff rates, not unlimited energy for one set price.
Most standard variable tariffs are protected by Ofgem's energy price cap in Great Britain. The cap limits the unit rates and standing charges suppliers can apply to eligible default tariffs, but it is not a cap on a household's total bill.
Fixed and variable tariffs at a glance
| Feature | Fixed tariff | Variable tariff |
|---|---|---|
| Rates | Normally remain the same for the agreed fixed term. | Can rise or fall in line with the tariff terms. |
| Total bill | Still changes with the amount of energy used. | Changes with both usage and any rate changes. |
| Contract | Usually has a defined term, often around 12 months but sometimes longer. | Usually continues without a fixed end date. |
| Exit fees | May apply if you leave early, subject to the tariff terms. | Standard variable tariffs do not usually have exit fees. |
| Price cap | Fixed tariffs are generally outside the default-tariff price cap. | Standard variable/default tariffs are generally covered by the cap. |
| Flexibility | Lower if an exit fee applies. | Usually easier to leave without a fee. |
How a fixed tariff works
When you choose a fixed tariff, the supplier agrees the unit rates and standing charges for a specified period. This can make budgeting easier because you know the rates will not change during that term, provided the supplier honours the contract.
Your monthly direct debit may still be adjusted. Suppliers often spread expected annual usage across monthly payments, and the payment can change if your actual usage or account balance is different from the estimate.
Potential advantages of fixing
- More certainty about the rates charged during the fixed period.
- Protection from rate increases on standard variable tariffs during the term.
- A clearer basis for household budgeting when combined with realistic usage estimates.
- The possibility of securing a tariff that is cheaper than the current or future variable rate.
Potential disadvantages of fixing
- An exit fee may apply if you leave before the permitted switching window.
- You might miss out if variable rates fall substantially.
- A longer fix can tie you to rates that later become uncompetitive.
- Special conditions may apply, such as payment method or smart meter requirements.
How a variable tariff works
On a variable tariff, the supplier can change the unit rates and standing charges in line with the tariff terms. A standard variable tariff is often the default tariff a customer moves onto when a fixed deal ends.
Ofgem reviews the price cap every three months. For customers on capped standard variable tariffs, the applicable maximum rates can therefore change quarterly. Suppliers may charge below the cap, and regional and payment-method differences can affect the rates shown on a bill.
Potential advantages of staying variable
- Greater flexibility, usually without an exit fee.
- You can benefit if capped or supplier rates fall.
- There is no need to commit to a fixed term while your circumstances are uncertain.
- It can be easier to switch later if a more suitable deal becomes available.
Potential disadvantages of staying variable
- Rates can rise, making future bills harder to predict.
- You may remain on a default tariff without actively checking alternatives.
- Price-cap headlines can be misleading if you treat the typical annual figure as your personal bill.
- The lack of a contract end date can make it easy to postpone comparison.
Important
The price cap is not a 'safe maximum bill'. It limits the rates used to calculate eligible standard variable tariffs. A household that uses more energy will pay more than the typical annual figure used in announcements.
Which option is more likely to suit you?
| A fixed tariff may be worth considering if... | A variable tariff may be worth considering if... |
|---|---|
| You value certainty about rates. | You want freedom to switch without an exit fee. |
| You expect to remain at the property for the contract period. | Your household circumstances may change soon. |
| The estimated annual cost is competitive. | You are comfortable with rates moving every few months. |
| You are comfortable with the exit fee and other conditions. | You want to wait for confirmed market information. |
| You would prefer protection from possible rate increases. | The current variable estimate compares well with available fixes. |
How to compare fixed and variable tariffs
Use the same consumption figures
Enter the same annual gas and electricity use for every tariff. Actual kWh figures usually give a more meaningful comparison than a broad household estimate.
Compare estimated annual cost
Do not compare only the monthly direct debit. Check the full-year estimate based on the same usage.
Review rates and standing charges
A low unit rate can be offset by a higher standing charge, especially for lower-use homes.
Include exit fees
If the fixed tariff has an exit fee, consider whether you are likely to move home or switch early.
Check the length of the fix
A short fix and a multi-year fix create different risks and levels of certainty.
Read the conditions
Check meter requirements, payment method, green claims, rewards and customer-service arrangements.
Consider uncertainty honestly
No one can guarantee where energy prices will move. Decide whether rate certainty or flexibility matters more to you.
Should you fix because the price cap is going up?
A rising price cap is a reason to compare, not an automatic instruction to fix. A fixed tariff might protect you from the next variable-rate increase, but the fix could still be more expensive than remaining variable over the full term.
Compare the fixed tariff's estimated annual cost with the applicable variable tariff, then consider known cap changes, credible uncertainty and the length of the contract. Avoid relying on a single forecast.
What about time-of-use tariffs?
Time-of-use tariffs charge different electricity rates at different times. They can benefit households able to move significant use to cheaper off-peak periods, such as electric vehicle charging or running appliances overnight. They can also cost more if most electricity is used at peak times.
These tariffs are a separate decision from a simple fixed-versus-variable choice. Check whether the off-peak savings fit your actual routine and whether a compatible smart meter is required.
What happens when a fixed tariff ends?
If you do not choose another tariff, your supplier will normally move you onto its standard variable tariff. Your supplier should remind you before the contract ends.
Citizens Advice says that when a fixed tariff has 49 days or less remaining, you can switch without paying an exit fee. That window is a good time to compare your supplier's renewal offer with alternatives.
Ready to compare fixed and variable deals?
Use your postcode and annual consumption to compare the estimated yearly cost, rates, standing charges, contract length and exit fees. BillGoose can help you see the differences clearly before you decide whether to fix or remain flexible.
Compare Like with Like
Compare tariffs using the same consumption figures. Look at total annual cost, not just the monthly direct debit. Review unit rates, standing charges, exit fees and contract length before deciding.
