Everything You Need to Know About Fixed Price Energy Tariffs

Whether you're managing a household budget or running a business, the idea of shielding yourself from volatile market rates is appealing. But how do fixed tariffs work, and are they the best option for you? 

Understanding Fixed Price Energy Tariffs

A fixed price energy tariff means that the rate you pay per unit of gas or electricity and any standing charges remains the same for the duration of your contract. This could be 12 months, 24 months, or even longer, depending on the deal you agree to. The main point is that no matter how the wholesale market shifts during that period, your rate stays the same.

It's important to clarify a common misconception here. A fixed tariff does not mean your total monthly bill will always be the same. Your energy costs will still vary depending on how much you use. For example, if your business has a busy winter period that demands high energy usage, your bill for that month will still be higher than in quieter months, even though the price per unit is unchanged.

Fixed tariffs does offer protection from market instability. In periods when energy prices are rising sharply due to global events, supply chain issues, or changes in government policy, those on a fixed deal can relax knowing that their rates are protected.

Is A Fixed Energy Tariff Best For Your Business?

For business owners, fixed price energy tariffs are particularly valuable tools for budget management. Knowing your energy costs ahead of time allows for more accurate financial planning, which can be essential for managing cash flow.

Businesses often have tighter operating margins and less tolerance for unexpected cost increases. Locking in a fixed energy rate can prevent financial stress during periods of market volatility. This is especially true in sectors where energy is a significant cost, such as manufacturing, hospitality, and retail.

Businesses that fail to renew their tariff or switch suppliers before the end of their fixed contract are often moved to expensive standard variable rates automatically. These rates can be significantly higher and come with fewer protections. That's why it's vital for businesses to track their contract end dates closely and plan ahead. If you're a customer of Purely Energy, we will do this for you and let you know when your contract is up for renewal so you can avoid the higher out-of-contract rates.

One of the features of fixed price energy tariffs is the flexibility in contract lengths. Consumers can often choose from contract lengths ranging from six months to five years. Shorter contracts may allow you to reassess the market regularly. Longer deals offer more long-term security but carry the risk of missing out if market prices fall during that time.

For businesses that are expanding or changing, a shorter-term contract might be more suitable, as it provides the flexibility needed to adapt. Meanwhile, stable businesses might benefit more from a longer-term fixed rate, as it guarantees stability.

It's worth noting that not all fixed tariffs are created equal. Some may fix only the unit rate, leaving the standing charges variable. Other 'fixed' energy contracts may only be fixed for a limited time during the contract and then be reviewed halfway through.

Before committing to a fixed energy tariff, it's a good idea to shop around. At Purely Energy, we work with over 30 suppliers, and each offers its own range of deals tailored to different needs. Working with a broker or comparison service can help you navigate these options and find the best tariff for your situation. If you would like help navigating the market to find the best deal for you, then Get A Quote.

How Can Purely Energy Help?

If you're ready to take control of your energy bills, now is the time to compare quotes and find a tariff that suits your needs, whether you're locking in a rate for a year or securing stability for the next three.

If you have questions about fixed energy contracts or want help lowering energy costs, contact us at 0161 521 3400 or Info@purelyenergy.co.uk. Alternatively, you can get a quick quote.

Megan Glover of Purely Energy wrote this article. If you have any suggestions or questions, please get in touch with us.