What types of energy tariff are available?
No matter how much energy you use around your home or office, your provider will charge you through an energy tariff. This determines how much money you need to pay for gas and electricity.
Our guide will run through each type of tariff so you can work out which is best for you, should you want to switch energy supplier.
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What types of energy tariff are available?
There are two main categories of energy tariff – fixed rate and variable rate. All other tariffs will be a variation on these two main types.
Fixed rate tariffs
Fixed rate tariffs mean that the price you pay for each unit of energy is fixed for a period of time. The term ‘fixed’ refers to the price per kilowatt of gas and electricity used, not to the amount of your bill. You still pay for every unit of energy, so the more you use the more you pay.
On a fixed tariff, even if a supplier raises its prices, the price you’ll pay won’t change during the fix. On the flip side, those fixed rates mean you’ll not feel the benefit if energy prices are cut. And while fixed rates are usually cheap, the exit fees charged by some suppliers can be relatively high. So, if you want to leave the deal, you could end up out of pocket.
If your fixed rate deal does impose an early exit penalty, you can sidestep this completely if you wait until your deal has 49 days or less left to run. Once you enter this period, you can shop around and switch without paying any additional fees.
If the fixed term ends you’ll be moved onto your supplier’s standard variable tariff, which is usually their most expensive.
READ MORE: Energy - your questions answered
Variable rate tariffs
On a variable rate tariff your price per unit of energy can go up or down at any time. The price you pay will tend to track the wholesale price of energy. You can normally leave a variable rate tariff without paying a fee.
Standard variable rate tariffs
Many variable rate tariffs provide good value, but be wary of the energy companies’ standard variable rate (SVR) tariffs, also known as ‘default’ tariffs.
You will be on a default tariff if you have never changed your energy supplier, or if you previously switched to a fixed rate tariff which has now ended.
SVRs tend to be the most expensive tariffs offered by the energy companies and are the main focus of the energy price cap imposed by Ofgem.
If you are on a standard variable rate or default tariff, then it’s likely you can save a significant amount of money by switching to another tariff using our price comparison service.
Dual fuel tariffs
Dual fuel tariffs provide both gas and electricity from the same supplier. This is helpful when switching, as everything is in one place.
Also, many providers offer a discount if you get both gas and electricity from them which can result in some savings. However, it’s important to check if the savings from this discount outweigh the cost of two separate energy deals.
READ MORE: How to compare dual fuel tariffs
Prepayment energy tariffs
A prepayment meter allows you to top up your gas or electricity before you use it via a corresponding prepay token, smartcard or key. Most energy suppliers provide this type of tariff and it could provide a beneficial way to manage what you’re spending on energy.
You may find yourself on this type of tariff if you inherited a prepayment meter at a house you’ve recently moved into or if your supplier has requested you move to this type of tariff after a debt on your account.
A prepayment tariff is one of the most expensive types of energy deal and your supplier may not allow you to leave this tariff if you are in debt. For this reason, prepayment tariffs are capped by Ofgem, limiting the unit rate which can be charged, which is calculated and updated twice a year.
As the name suggests, online tariffs are managed via the internet. Your meter readings for gas and electricity will be recorded online and you pay your bills via an online account. Some companies may even have an app where you can pay your bills on the go.
Should you need help with your account, you can still contact your supplier via the phone.
Online tariffs can be either fixed rate or variable and dual fuel options are also available.
Time of use tariffs
Time of use tariffs alter the price of your gas and electricity depending on the time you use them. These tariffs include ‘Economy 7’ and ‘Economy 10’ and offer cheaper energy during certain hours when there is lower demand.
For example, Economy 7 tariffs offer a low-cost rate for electricity for seven hours each night – this rate will be cheaper than the rate charged during the other 17 hours of the day.
You will need a special meter for a time of use tariff, capable of charging and measuring two rates depending on when you use your energy. This type of tariff is handy if you know when you’ll be using your gas and electricity and if it fits in with the times when it’s cheaper.
Capped energy tariffs
Like fixed rate tariffs, capped tariffs guarantee that the price per unit of electricity or gas will not go up. The main difference is that with a capped tariff, the price could go down and benefit you. Because the prices cannot rise, capped tariffs can be expensive compared to other types of tariffs. However, they’re good for peace of mind as you won’t receive any unexpected price increases.
Green energy tariffs allow you to do your bit for the environment by purchasing your energy from companies who produce or purchase it from renewable sources.
Electricity tariffs are normally 100% green, the energy produced coming from renewable sources such as solar, wind or waves.
Green gas is more difficult due to there being very little renewable gas produced in the UK.
Some renewable tariffs will pay a proportion of your bill into funds that support (via investment) either renewable energy projects (such as solar power, hydro-electric generation or wind farms), or reforestation projects.
Green energy used to be regarded as more expensive, but in recent years the price of renewable energy has fallen, and these tariffs are now often among the cheapest on the market.
READ MORE: Green energy explained
No standing charge
Typically, a utility bill contains two elements; a standing charge for having the service available to you, and a per unit charge for the energy you use.
With a no standing charge tariff, you only pay for the energy you use.
This could be beneficial if your energy usage varies a lot, particularly if there are periods each month where you don’t use any energy at all.
In order to check if a no standing charge tariff might be your best option, consider carefully how you use your energy and then compare these tariffs with other products listed on our site. Check the kWh rates charged on this tariff carefully as these will often be higher per unit of energy used.
Business energy tariffs
If you’re a business owner, you’ll need to take out an energy tariff that’s been designed for commercial properties.
Even if you work from home, if at least 50% of the energy you use is for business purposes, you might benefit from a business energy deal. These differ from domestic deals, the main difference being there is no dual fuel option, so you’ll need separate contracts for gas and electricity.
How to switch energy supplier
If you want to cut the cost of your energy bills, switching supplier is the simplest way to save money.
To get a start on your energy price comparison and browse various tariffs, simply click the ‘COMPARE ENERGY’ button below. For more information on how to switch, check out our energy switching guide.