Compare Cheapest Gas and Electricity Prices – January 2025

The energy price cap is a limit set by Ofgem, the energy regulator, on how much suppliers can charge customers on standard variable tariffs for their energy. The latest price cap came into affect on January 1st 2025.

It’s designed to protect consumers from excessive charges, especially those who do not actively shop around for better deals.

The price cap directly impacts variable rate tariffs by capping the maximum price suppliers can charge.

Fixed rate tariffs are not directly affected by the price cap, as their prices are set for the duration of the contract.

A fixed rate tariff is an energy tariff where the price you pay for each unit of electricity or gas remains the same throughout the contract period, typically one or two years.

This means that even if energy market prices go up or down, your rates stay constant.

It works by locking in a specific rate when you sign up, providing you with stable and predictable bills. This stability can make budgeting easier since you know what you’ll be paying each month, regardless of external price fluctuations.

A variable rate tariff is an energy tariff where the price you pay for each unit of electricity or gas can change over time, usually in response to shifts in the energy market.

If wholesale energy prices rise, your rates might increase; if they fall, your rates could decrease. This type of tariff offers flexibility and the potential to benefit from lower prices, but it also carries the risk that your energy costs could go up unexpectedly.

Unlike fixed tariffs, variable rates fluctuate and are often tied to the broader market conditions.

The main difference between fixed and variable rate tariffs lies in how the prices are set and how they change over time.

Fixed rate tariffs keep your energy prices stable for the duration of the contract, providing certainty in your monthly bills. They do however often include Exit Fees, which you may have to pay to leave the tariff early.

In contrast, variable rate tariffs can change depending on the market, which means your bills can go up or down.

Fixed tariffs offer stability and predictability, while variable tariffs offer flexibility and the potential to take advantage of lower market prices.

You might choose a fixed rate tariff over a variable rate tariff if you prefer stability and predictability in your energy bills.

With a fixed rate tariff, you lock in your energy price for a set period, protecting yourself from potential price hikes in the energy market.

This can be especially beneficial during times of rising energy costs, as it shields you from sudden increases.

If budgeting is important to you and you want to avoid the risk of fluctuating bills, a fixed-rate tariff is a solid choice.

Exit fees are charges you might have to pay if you leave your energy contract before it ends.

These fees are more common for fixed-rate tariffs because the supplier has agreed to provide energy at a certain price for a set period. If you leave early, the supplier may charge an exit fee to cover the costs associated with your early departure. They are often between £50-150 per fuel.

Variable rate tariffs, on the other hand, do not tend to have exit fees, as they don’t lock you into a set rate.

If you decide to switch to a different tariff or supplier before your contract ends, you might have to pay exit fees with a fixed-rate tariff.

These fees compensate the supplier for the potential loss they incur from your early departure. With variable-rate tariffs, exit fees are less common but can still apply, especially if you switch tariffs within a certain period after signing up.

Always check the terms of your contract to understand when exit fees might be charged.

The best way to compare fixed and variable tariffs is to use online comparison tools that allow you to see the current rates and terms offered by different suppliers.

Look at the price per unit of energy, the length of the contract, and any additional fees like exit charges.

It’s also important to consider your own preferences, such as whether you value price stability or are comfortable with some level of risk.

Comparing the overall cost and potential benefits of each type will help you decide which is the better fit for you.

Before switching from a variable to a fixed rate tariff, or vice versa, consider your financial situation and risk tolerance. If you prefer stability and predictability in your bills, a fixed rate might be better.

However, if you’re open to the possibility of fluctuating bills and want the chance to benefit from lower prices, a variable rate could be more suitable. Also, consider the current market trends – if prices are expected to rise, fixing your rate might be a smart move.

Finally, check if there are any exit fees associated with switching and weigh the costs against the potential savings.

It’s a good idea to review the tariff you are on at least once a year or whenever your current contract is about to end.

Energy markets can change, and new tariffs might become available that offer better rates or more favourable terms. Regularly checking your tariff ensures that you are not overpaying and that you have the most suitable plan for your needs.

Even if you’re on a fixed rate, it’s worth looking around a few months before your contract ends to explore your options.

If market prices drop significantly after you choose a fixed rate tariff, you won’t benefit from the lower prices because your rate is locked in for the duration of the contract. This is one of the risks of choosing a fixed rate.

You’ll continue paying the rate you agreed to, even if cheaper rates become available. If the savings from a lower rate outweigh the exit fees, you might consider switching, but otherwise, you’re committed to your fixed rate until the contract ends.

Variable rate tariffs are directly responsive to changes in the energy market, which means your rates can go up or down based on market conditions.

If energy prices increase, your tariff rates are likely to rise as well, leading to higher bills.

Conversely, if prices fall, your rates should decrease, offering potential savings. This responsiveness can be both a benefit and a risk, depending on the direction of the market changes.

Combining both tariff types isn’t typically possible within a single energy account, as you generally have to choose between a fixed or variable tariff for your entire energy supply.

However, you could theoretically balance the benefits and risks by having one type of tariff for your electricity and another for your gas, if your supplier allows it.

Alternatively, you could consider splitting energy supplies across multiple properties if you have them. This strategy could potentially balance stability with the flexibility to benefit from market changes, but it requires careful management and might not be available with all suppliers.