When it comes to both electricity and gas, there seems to be numerous tariffs and packages we can choose.
However, the fixed energy tariff has long been one of the standard ways to go and today we have a complete guide so you can understand just how it works and whether it suits your needs.
Fixed energy tariff ,what is it?
First and foremost, this particular tariff will keep your rates at the same level for a certain period of time. Rather than changing from one month to the next, they will be fixed (hence the name) for typically between one and four years.
If you choose to go with a plan of this type, you need to realize one important factor; your bills will still vary each month.
Rather than offering a set bill per month, this plan will keep the cost of gas and electricity the same so you will still pay more as you use more of both.
Essentially, it is like securing fixed petrol prices for two years; you will stay pay more money to fill the tank than to put in half.
These days, fixed contracts seem to dominate the ‘best offer’ lists around the internet and this is because many offer the best of both worlds.
If you want to avoid the sharp increases the market sees sometimes, this will keep you protected. On the flip side, you need to be careful because you could get locked into a contract where the rate per unit is higher than if you had a variable deal.
As you get to the longer contracts, such as ones designed for four years, you won’t be able to leave without paying an exit fee which causes all sorts of problems.
For short and medium term plans, fixed contracts can be a good idea but it becomes a bigger risk the longer the contract.
Just like playing the stock market, you could lose out or save money depending on how the rates change after your contract starts.
If the rates decrease too much and you’re stuck on the higher fixed plan, you may have to take the bullet of the early exit fee just to get out.
Ending a Fixed Contract
If you’re currently on a fixed price contract with only a short time to run, your first step should always be contacting your current supplier to see which package you will be moved to.
Normally, it will be the most basic plan the supplier has but some will offer you the chance to get back onto a fixed contract once again.
If the former is true, you will need to take action because the standard plan for each supplier will normally be the most expensive from everything they offer.
If you’re looking for security and don’t mind paying slightly higher prices over the course of your contract (on average), another fixed contract might just be the way to go.
When you know what will happen once your contract comes to an end, you can start to make your decision.
Of course, we always recommend comparing the market because this allows you to see its state and what deals you could receive. If you find much cheaper deals elsewhere, you can switch for no fee since your contract is ending anyway.
If you need help comparing the market, we have a special section on our site dedicated to the latest prices of fixed plans.
Summary – Often, the most common question that comes along with this topic is ‘are these contracts a good idea?’. Ultimately, it can be hard to give a definite answer because it depends on your approach and willingness to risk in the market. At the very least, they offer security and you could end up saving a good amount of money so they can be fantastic. On the other hand, they do present a risk just like a fixed mortgage. The only difference; you are betting on price rises rather than an increase in the interest rate.
Whatever you decide, feel free to browse our website and use the various tools we have available. Over the course of two, three, or even four years, history suggests you will pay slightly more money on a fixed contract but it gives security and it protects against huge rate increases. If the rates drop, you will lose out but let’s not forget that prices haven’t dropped for around five years since 2012!