Choice is a good thing. Chocolate HobNob? Bourbon? Custard Cream? See, lots of delicious choices (Custard Cream, obviously!). But sometimes choice can be overwhelming. Try buying some bin bags from a supermarket. You’ll be faced with black ones, green ones, grey ones and white ones. Various sizes, some for wheelie bins some for pedal bins. Some with tie handles, some with special little tabs to seal them. Some that claim to be ‘heavy duty’, others that are eco-friendly. Let’s be honest, it’s all a bit much. You only came in for a few bin bags and that was half an hour ago. At least they’ve got plenty of Custard Creams in the biscuit aisle.
Well, the same can be true of energy tariffs. Being able to choose between lots of tariffs means you can select the one which is best suited to your budget and lifestyle. It also means you can come to Look After My Bills to ￼switch electricity suppliers or￼ switch gas suppliers to a better tariff. If you’ve got a dual fuel tariff you can even ￼switch gas and electricity suppliers simultaneously. What’s that you say? ‘What’s a dual fuel tariff?’ That’s the problem isn’t it? The sheer number of tariffs on offer can make it difficult to work out and remember exactly how each tariff operates and which would be the best for you. The temptation is simply to stick with what you’ve got because doing that doesn’t make you want to bang your head against the wall sobbing ‘Why are there so many tariffs, it’s as if the energy suppliers are deliberately trying to confuse their customers…’.
You need to resist this temptation because, according to Ofgem, the average standard tariff in 2018 – the one which most people are on, whether they realise it or not – costs £1,254 per year. At the same time, the cheapest available tariff costs just £880 per year. That’s a £374 difference for the same product, delivered in the same way, but described slightly differently. That’s how a choice like ￼fixed tariff vs. variable can impact on your finances, and that’s why it’s worth knowing the difference.
Energy Tariffs: Standard variable tariff
This is typically the default tariff your supplier offers. It won’t be a surprise to discover that it’s also usually the most expensive tariff they offer. Funny, that. When any special tariff you’ve signed up to comes to an end, you’ll automatically be switched to the standard variable tariff. You’ll also be placed on this tariff when you first move into a home. There are no contracts involved with a standard tariff and no exit fees, which is a good thing, but the price can rise when the wholesale price of energy does, which is a bad thing. You’ll enjoy flexibility and the freedom to switch easily, but you’re also at the mercy of the markets. This is the kind of tariff which many loyal customers who don’t get round to switching suppliers find themselves ‘enjoying’/’suffering’.
Energy Tariffs: Fixed energy tariffs
A fixed energy tariff is a temporary contract which sets the amount you pay per unit of energy for the duration of the contract. When you switch for a cheaper deal, the chances are that you’ll be switching to a fixed energy tariff offered by another supplier. Fixed tariffs offer peace of mind, because you know that the rate you pay for your energy can’t go up while you’re on the tariff, no matter what happens to the rest of the energy market. It should be noted that this doesn’t mean your energy bills won’t ever go up – this depends upon how much energy you use and whether you adopt the kind of clever money-saving tips recommended by Look After My Bills. There’s also the possibility that energy prices could fall, but your rates stay fixed at the same level.
Some fixed tariffs charge an exit fee for leaving, but Ofgem rules state that this fee can’t be applied if you switch suppliers less than 49 days before the end of the contract. If an exit fee does apply, then it could still be worth it if the savings you make by switching will be greater than the exit fee being charged.
Energy Tariffs: Dual fuel tariffs
A dual fuel tariff means you buy your gas and electricity from the same supplier. This can be convenient, because it means you only have to deal with one energy company, and also economical as many suppliers offer a discount to dual fuel customers. It’s not always the cheapest option, however, as some companies offer individual deals for gas and electricity tariffs which, taken together, cost less than a dual fuel deal.
Energy Tariffs: Online tariffs
An online tariff is one which is completely paperless, with all correspondence such as bills and your welcome pack for signing on sent digitally. In most cases they’ll arrive as attachments to emails or via downloads from the supplier website. Many people enjoy the convenience of switching to paperless energy provision, and suppliers often offer a discount for an online only tariff. When it’s combined with other discounts, the online version of a tariff can often be the cheapest option of all.
Energy Tariffs: Prepayment tariffs
Prepayment tariffs are often referred to as ‘pay-as-you-go’ tariffs, which offers a clue as to how they operate. Customers on prepayment tariffs pay for their energy before using it, by topping up credit on the meter using a token, key or payment card. The card is usually charged in person at a local retailer, although more and more suppliers are offering the chance to top up online using an app or website.
Many people are placed on prepayment meters as a means of clearing an existing energy debt, or find that they’ve been left with this type of meter when they move into a new property. Some people prefer prepayment as a means of controlling spending on energy, but the tariff charged is usually more expensive than a fixed rate deal. Despite a cap placed on prepayment rates by Ofgem, this is generally one of the most expensive ways of paying for your energy.
Energy Tariffs: Green energy tariffs
A green tariff is one which provides electricity from 100% renewable sources, with some suppliers going further and supplying [at least] 10% renewably sourced gas as well. It’s clearly the best option if your overriding concern is protecting the environment, but in recent years, as the renewable energy market has grown, green tariffs have also often been amongst the most affordable.
No matter which kind of tariff most appeals, auto-switching with Look After My Bills will ensure that you’re always on the cheapest possible version.