Energy tariffs explained

Competitively priced gas and electricity tariffs are hard to come by but it's worth keeping a look out to see if you can find one that saves you money.

Energy prices are currently high. The price cap, which sets maximum prices for out-of-contract tariffs and which changes every three months, rose by 4% on 1 October.

If you can find a fixed deal that's cheaper than the variable price capped rates, you may be able to save money.

If you can be flexible with when you use electricity and avoid the peak timeslot of 4-7pm, you might benefit from a tariff with lower charges at off peak times. 

Find out the difference between fixed deals and variable tariffs, what the other types of tariffs are and how they work.

Then find out how to get the best energy deal.

Types of energy tariff 

Energy tariffs are the set rates that you pay to your energy provider for gas, electricity or both. They come in two basic types: fixed or variable. 

Which type suits your household best depends on:

• how much certainty you want over the price you pay 
• how often you want to switch provider or tariff.

Use our free, independent energy comparison service to compare gas and electricity prices and find the best provider for you.

Variable energy tariffs

Variable tariffs change price each time your supplier changes its rates. 

They're known by several names:

• standard variable tariffs
• default tariffs
• out-of-contract tariffs
• evergreen tariffs.

They're the most common tariff customers are on at the moment.

If you didn’t switch provider or renew your tariff after your last fixed deal ended, it's very likely that you're on a standard variable tariff or default tariff. 

These tariffs are subject to the energy price cap. This is effectively a cap on the price charged for each unit of energy, rather than a cap on your total bill, and is reset by energy regulator Ofgem every three months. 

Fixed energy tariffs

Fixed deals set the rates you pay for the length of your contract. They fix the amount you pay for each unit of gas and electricity you use, and your daily standing charge.

This means you know the prices you pay won't change for the length of your deal (usually 12 or 24 months). 

Your bills or direct debit payments aren't fixed. They depend on how much energy you use.

If your energy company increases its prices, you won't be affected. But you won't benefit if prices drop either. 

See the cheapest fixed tariffs on offer and how to get the best energy deal.

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Tracker tariffs

Think of these as a halfway house between variable and fixed tariffs. They come in two types:  

• Capped 
• Dynamic.

Capped tracker tariffs change prices every three months following the price cap but staying a set amount below it (£50 per year, for example). Your unit rates, and often daily standing charges too, will be lower than the price-capped ones.  

Capped tracker tariffs are for a fixed term, usually 12 months, and often refer to a ‘price cap guarantee’ in their terms and conditions. 

Dynamic tracker tariffs adjust their prices every day (or, in some cases, every half hour). They can be capped, but at much higher rates than standard tracker tariffs. Agile Octopus, for example, has a cap of 100p per kWh for electricity. 

Some dynamic tracker tariffs pay you to use electricity when there is an excess on the grid. 

Economy 7 and other 'time of use' tariffs

These tariffs offer cheaper electricity at times when there is lower demand on the National Grid. Peak hours will have higher prices than the price cap so, to take advantage of this kind of tariff, you'll need to know when your off-peak windows are and able to adjust your usage accordingly.

You'll need energy meters that can determine how much energy you use at certain times of day to access them. Historically these would have been two-rate meters, usually called Economy 7 or Economy 10 meters. Now, smart meters can record detailed data about exactly when you use your energy, so in theory anyone with a smart meter could access these kind of dynamic pricing models.

Some energy providers only offer smart TOU tariffs to customers with particular green tech, such as an electric vehicle charger or a heat pumps. 

Get more details in our guide to time of use energy tariffs.

Prepayment energy tariffs

Prepayment, or pay-as-you-go, tariffs mean that you pay in advance for your energy, by topping up.

You'll need a prepayment meter, or a smart meter set to prepayment mode, to access them.

If you have a smart prepayment meter, you can usually top-up online, or via your energy company's app. 

Traditional prepayment meters are topped-up using prepay tokens, cards or a key. 

Can I switch my prepayment tariff? You can switch supplier and tariff as long as you have less than £500 of debt on your meter. Smaller providers may have lower limits.

If you want to pay a different way and have a smart meter, your energy company will need to change it to 'credit mode'. They can do this remotely.

If you have a traditional prepayment meter, you'll need a new meter. Your supplier won't usually charge you for this. 

If you're in debt, your energy firm may refuse to change how you pay.

Find out whether a prepayment meter is right for you.

Which energy tariffs are cheaper? 

Typically fixed energy deals save you money compared with the energy price cap.

However there is currently a limited choice of competitive fixed tariffs as a result of volatile wholesale energy prices since the start of the Middle East conflict. 

See the latest cheapest fixed tariffs in our guide on how to get the best energy deal.

Before you switch, check that a fixed deal will save you money compared to staying on your supplier's price-capped rates. Sometimes there's little difference between a supplier's price-capped variable tariff and cheapest fixed-term tariff.

The price cap on out-of-contract or default variable tariffs doesn't mean that suppliers have to charge this amount but they tend to. So it's not really worth switching between different companies' variable tariffs.

If your fixed-term contract is running out, your energy supplier will suggest new deals. These may be higher than the variable or default tariff. You do not have to choose any of them.

If you simply do nothing, you'll be switched to the variable tariff at the end of your contract.

Zero standing charge tariffs

A few providers now offer zero-standing charge tariffs. These tariffs make up for the lack of a daily standing charge with a higher rate for each unit of electricity and gas used. So while they could be a good option for those who use little to no energy over long periods, higher unit rates may mean they aren't cost-effective for those with typical energy use. 

If you're looking into a zero standing charge tariff, you'll need to weigh up how much you could expect to pay on it compared to a typical tariff. 

See how the energy price cap works and whether it applies to your bills: What is the energy price cap?

Other common tariff types and terms to look out for

Dual fuel tariffs

A dual fuel energy tariff means you pay for your gas and electricity through the same energy supplier. 

They can be cheaper than paying for gas and electricity separately and mean less admin. 

However you might find you can save a little more by having separate suppliers for gas and electricity.

Online and paperless energy tariffs

Online energy tariffs mean you can only deal with your energy provider online. You'll need to send meter readings online and will get 'paperless' statements.

This usually means your bills will arrive as email attachments or you'll be able to download them from your account on the energy firm's website or via your app. 

Sometimes you must contact your energy supplier online only too - i.e. through live chat or email, rather that phone.

It's usually cheaper to manage your account online; paper b ills often cost extra. 

Green energy tariffs

Energy tariffs sometimes make environmental claims including that they are 100% renewable. This claim isn't always as straightforward as it seems. 

Some energy providers invest in their own green energy generation, while others pay into environmental schemes. 

How green is your energy company?. We compare them so you can find out which is best for you.

Check prices before you switch: some green tariffs aren't more expensive, while others charge higher prices than average. Also look carefully at what the tariff entails, as some have more direct environmental benefits than others.