Your Complete Guide to Fixed Price Energy Tariffs
One of the most common questions we get here at Love Energy Savings is regarding fixed price energy tariffs and exactly how they work.
With constant energy price fluctuations, fixed-price energy contracts have grown in popularity. This is because they enable business and domestic customers to stabilise the price they pay for gas and electric in an ever-changing market.
At Love Energy Savings, we’re dedicated to making complex processes as easy as possible for our customers to understand, which is why we’ve created a guide to give you everything you need to know about fixed-price energy tariffs.
- What is a fixed-price energy tariff?
- Is there a difference between fixed-term, fixed-price and fixed-rate?
- Are fixed-price energy tariffs cheaper than variable tariffs?
- What are the benefits to a fixed-price energy tariff?
- What are the disadvantages to a fixed-price energy tariff?
- What happens at the end of a fixed-price energy contract?
- How can I switch to a fixed-price energy tariff?
Fixed-price gas and electricity tariffs ensure the cost of your energy does not increase for the duration of your tariff agreement. They can be fixed for a number of years; in some cases, as many as five.
While this means that the price you pay per kWh will remain fixed, it doesn’t mean that your estimated annual bill will not increase as your bill is based on actual energy usage.
There are a number of fixed-price packages available from suppliers across the UK. Comparing suppliers’ deals will help you find the best offer based on your location and energy usage. At Love Energy Savings, we take care of all the hard work for you with our handy comparison tool which compares the most trusted business energy suppliers in the market to help you find fantastic deals on your business gas, commercial electricity and domestic energy.
These terms all refer to the same type of energy contract. The different affixes: ‘term’, ‘price’, ‘rate’ refer to a specific part of that contract i.e. ‘term’ refers to the length of the contract period. These terms will be used interchangeably by energy companies and comparison companies but ultimately mean the same thing.
Although you may not necessarily be paying the lowest amount compared with some variable rate tariffs, you’ll be safeguarded from any price hikes across the market.
However, once you’re tied into a fixed-price energy deal, you are committing to paying that price for an agreed period of time and if you wish to cancel your contract early, you could be liable to pay an exit fee to the supplier.
There are a number of benefits to choosing a fixed-price energy tariff:
- Budget certainty for the duration of your energy contract
- No rising future commodity and non-commodity costs
- Suppliers absorb the long-term pricing risk
- Less complex than other energy contracts
- Supplier may increase costs to try and counter the long-term risks
- Does not enable you to take advantage of any price reduction during term
While fixed-term energy contracts protect you from short-term wholesale energy price spikes, they stop you exploiting savings from sudden price drops, early exit fees notwithstanding.
By working closely with our suppliers, Love Energy Savings has solved this problem. Over half of our suppliers have switching windows of 1 year, meaning even if your contract due date isn’t for 12 months you can take advantage of a short-term price drop.
Wholesale energy prices fluctuate every year but have increased by 25% since 2015. Our advice? Play the long game and fix your rates with one of our 48 or 60-month contracts, protecting your business in the long-term.
3-5 months before your contract end date you’ll receive an initial renewal letter from your current supplier. If Love Energy Savings can’t beat or match this rate, we’ll give you up to £1,000. That’s confidence!
If you don’t switch tariff or supplier at least 60 days before your contract end date, you’ll be rolled over on to a default tariff; also known as a standard variable tariff (SVT). Ofgem estimates that an average SVT is £374 a year more expensive than the cheapest market tariff.
Most contracts have 60 days’ switching notice periods. Fortunately, with Love Energy Savings it only takes 5-minutes to compare and switch.
We’ve made the process of switching energy providers easier than ever thanks to our free online comparison tool. To make sure you get the best possible deal with your new fixed price energy tariff, Love Energy Savings can provide you with a comprehensive comparison of all major and smaller energy providers, ensuring you find the perfect deal for your business electricity and home energy needs.