The Energy Tariff Maze
Gas tariffs are offered by most energy companies at either fixed of variable rates. It can be difficult to figure out whether fixed or variable tariffs could lead to the cheapest gas prices for you. Luckily, comparing the two will allow you to see some pros and cons of both, as well as to see which would be cheaper in certain economic conditions. If you understand how these tariffs compare to one another and arm yourself with some basic information on the current state of the UK economy, then you should be able to pick the best plan for you.
With these tariffs, when gas prices go up or down on the market, then so will your gas bill. The good thing about it is that if gas prices go down your prices will also drop and you could stand to make a lot of savings. Unfortunately, you would not be protected from price hikes and could find yourself stuck with expensive tariffs. Because of this, variable tariffs don't provide much security and could cause some hiccups in your long term financial planning.
Fixed tariffs, on the other hand, do provide some security and stability for at least a fixed period of time. Signing up for a fixed tariff plan means that you receive protection from price hikes until a clearly indicated end date. Length varies with supplier, but fixed tariffs can provide you with anywhere from a year to four years of fixed costs. If gas prices rise then you will be glad not to have to pay at the increased prices. However, you might also regret signing up to a fixed tariff if prices suddenly plunge.
Gas prices do tend to fall in warm, comfortable temperatures when homes do not need to be heated as much and when they aren't hot enough to require natural gas powered cooling systems. These are typically the months of May, June, September, and October. For a short time markets may also see price drops if supply suddenly exceeds demand as either domestic or imported sources surge. In these situations you may benefit from a variable tariff.
However, what needs to be kept in mind is that gas prices rise during the winter and summer months as heating and cooling systems are used more often. Gas supply may also be unpredictable and affected by a variety of factors. In such situations those on variable plans will find themselves paying more.
These are quite an appealing option in the current UK market. Gas and energy prices overall are expected to rise, and this can be seen in the fact that most of the UK's energy companies are beginning to offer more - and more attractive - fixed rate deals. The UK's "Big Six" energy companies have also made announcements about the coming need to raise prices. In the face of prices that are predicted to rise, many people are opting for the security of fixed rate tariffs.
One disadvantage of fixed rate tariffs is that if you shop around you will see that they are usually a bit more expensive. However, because so many companies have begun to offer fixed rate plans, the competition is driving prices down and creating some very attractive deals. So even though fixed rate plans are asking for more than variable plans, many see it as reasonable to pay the extra amount in exchange for a promise that their tariffs will not increase if gas prices do.
You should also be aware of the fact that even on a fixed rate plan there are things you can do to lower your gas costs. A fixed tariff essentially means that it is the price per unit of energy which will not fluctuate, not the price of your monthly bill. So if you use less gas for heating or cooling you will also be rewarded with a cheaper bill.
Comparing gas tariffs should help you decide which one is right for you. If you are worried about gas prices rising in the future then you will appreciate fixed tariff offers. However, if you would prefer that your gas prices fluctuate with the state of the economy because of the savings you could stand to make then variable tariffs are right for you.