Know the Difference: Variable, Fixed, and Capped Energy Tariffs

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energyOne thing you can’t get away from is paying for energy. You need it – every day. But, you don’t have to accept the standard rates offered by your current service provider. Here are a few options you might not know about.

Standard Tariff

A standard tariff is one where you pay for energy as you use it. It’s often the default tariff of the supplier, sometimes called a “variable” or “cash” tariff. These can get quite pricey, especially during times when energy usage is high. For example, during the winter, heat can become extremely expensive, and thus this tariff might cost you more because you’re paying current market rates instead of the discount rate.

Fixed Tariff

A fixed tariff is one that fixes the price of the energy you’re using. It gives you guaranteed standing charges and unit rates for a fixed amount of time. Some tariffs will charge you an exit fee if you leave prior to the end of your contract. If you switch between 42 and 49 days before the end of your tariff, your supplier can’t charge an exit fee however.

This is a great option if you want peace of mind knowing what your energy costs will be. A fixed tariff only guarantees the cost of the standing charge and pence per kilowatt hour. So, you may end up paying more if you end up using more. But, if you’re consistent about your energy usage, you should pay about the same each month.

Online Tariff

An online tariff is one where you forego the benefits of having an energy supplier manage the billing and meter reading for you and instead do the reading yourself. You can learn about switching suppliers and adopting this option online (of course). It’s a great option if you don’t mind managing the meter readings and billing yourself.

You will have to send in your readings, along with agreeing to receive paperless billing.

It’s also the cheapest option of the bunch. The downside is if you don’t want to, or can’t, manage online correspondence. Since this option forces you into online billing, if you like receiving things by post, this won’t be a good option for you.

Green Tariff

A green tariff substitutes traditional energy sources for environmentally-friendly ones. The green energy tariffs tend to be more expensive than traditional energy counterparts, but they are good options if you want to reduce your environmental footprint.

Dual Tariff

A dual tariff is one that combines gas and electric. These tariffs can save you some money because the supplier gives you both of your major utility services in one package. Sometimes, there’s a fee for switching, but not always.

If you want the benefits of having combined services, this is the tariff for you. But, you should be on the lookout for the amount of the discount being offered. It doesn’t always match the potential savings of going with two different suppliers. So, always do the maths and figure if you’re really saving.

Abby Thornton has worked as a personal finance consultant for several years. She herself enjoys saving money where she can and likes to share her knowledge with others on personal finance blogs.

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Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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