What is a Standard Variable Tariff?

Standard Variable Tariffs are available as one of the two main energy packages offered to consumers in the UK. This type of tariff is usually the more expensive, when compared to a Fixed term deal.

Almost all energy suppliers offer a Standard Variable Tariff. The variability alluded to in the title refers to the amount you will pay per KWh. When you are on a Standard Variable Tariff, the price you pay per KWh depends largely on the wholesale cost of the energy. Other factors such as the UK interest rate will also have an impact.

To put it in the simplest of terms, if the cost to the supplier to provide the energy goes up then so will your bill. If the suppliers costs come down, your bill will show lower KWh charges. These rises and falls are not usually too dramatic. Energy suppliers must also give 30 days notice before they can hike gas and electricity bills.

Are they a good deal?

This depends on your circumstances. Around 50% of household consumers are currently on a Standard Variable Tariff. Of those, around 25% of those consumers are unaware of which type of deal they are on. This suggests that they might not be getting the best value for money. In fact, the cap on energy prices is only likely to have any effect on the bills of Standard Variable Tariff customers.

One of the main advantages of this type of contract is the lack of a minimum term. If you wish to switch suppliers in 3 months time, then you can. On a fixed deal you would pay an ‘exit fee’. You will also gain from any drops in the market. If the wholesale energy costs fall, you save. If the UK interest rate falls, then you save again.  Although this can be a disadvantage when costs rise, you do have protection. Before raising the amount charged per KWh, customers receive notification in writing 30 days before being applied. If a rise is going to be particularly large, then the 30 days notice can be used to switch to another energy supplier.

On average, Fixed Term Tariffs tend to be up to 10% cheaper than Standard Variable. However, they are not suitable for everyone. If you cannot commit to a fixed term then any savings you get on KWh costs becomes undone by exit fees. You would also be ineligible for any price drops that you would get as a Standard Variable customer.

Personal circumstances could be more important than the cost of a unit of energy. After weighing up the advantages and disadvantages of each, take advantage of an energy market price comparison to see the deals for yourself.

Who would opt for a Standard Variable Tariff?

Standard Variable Tariffs are now the default deal for energy suppliers. In the past, rolling over a fixed 12 or 24 month contract straight into another 12 or 24 month contract caused a lot of anger amongst consumers. This practice happened without the express permission of the bill payer. This meant customers had another fixed term of 12 to 24 months, without asking. This practice is now banned, so after the fixed deal ends it will automatically transfer to a Standard Variable Tariff. 

For many, the freedom to change to a new energy supplier is a huge advantage. At any time a consumer can look for better deals. When one is found, switching can be done without having to stump up any extra fees. 

If you are expecting a fall in the wholesale price of energy, or the interest rate for that matter, then a Standard Variable Tariff may work out better for you. You may get the best deal today on a fixed term deal. 6 months later, that price may not look as attractive as it did. 

Overwhelmingly though, it seems that a lot of people simply don’t understand what kind of tariff they are on. If you don’t know which deal you are on, it is likely that you are a Standard Variable Tariff customer. If this describes you, then compare deals to make sure that you are not missing out.

For those consumers that have time to spend time looking at bills and managing them, Standard Variable Tariffs can work well. If you prefer to set up an energy deal with a direct debit and forget about it for a while, they may not be for you.

Our objective is simple, to provide you with the information to help give you confidence when switching to a new energy supplier.

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