Written by David Walter, Chief Commercial Officer
21 Jan 2025 - When choosing an energy tariff, you've probably seen the terms 'fixed' and 'variable' floating around – but what do they actually mean, and which is right for your home?
We'll break down fixed and variable energy tariffs to help you find the best fit – whether you're looking to save on your energy bills or prefer a flexible option that lets you switch tariffs anytime.
An energy tariff is your plan with your energy provider, which decides how much you pay for your gas and electricity supply. There are a few different types of tariffs available, but the most common are fixed and variable rates.
Whichever type of tariff you take, it’s made up of two costs, which are combined to form your monthly bill:
Standing charge – This is a daily fee you'll pay regardless of how much energy you use. It covers the cost of keeping your home connected to the grid, including maintenance and line rental.
Unit rate – This is the price you pay for each unit of energy you use, measured in kilowatt-hours (kWh). The more gas or electricity you use, the more you pay.
For more details on how these two measurements affect your energy bills, see our guides on standing charges and understanding kWh.
A fixed rate tariff essentially 'locks in' a price for your energy and means the price you pay per unit of energy (unit rate) stays the same for the length of your contract — usually 12 months. This tariff has become popular in recent years thanks to fluctuating energy costs, as the set prices mean that even if market rates go up, your unit rate won't change.
Here are some of the benefits of a fixed rate tariff:
Price stability – You'll know exactly how much you pay for your energy rates each month.
Protection from price hikes – If energy prices rise, you won't be affected as your rate is locked in for the duration of your contract.
And, of course, there are also some disadvantages. These include:
No savings if prices fall – If energy prices drop, you won't benefit from the lower rates as your tariff is fixed.
Early exit fees – Some fixed tariffs charge early termination fees if you want to switch before your contract ends.
A variable tariff means the price you pay for your gas and electricity can go up or down depending on general market prices. These tariffs are usually a rolling, open-ended contract, meaning you're not tied to your provider and can leave anytime.
Unlike fixed tariffs, your unit rate isn't set, so it might change throughout the year — which can work in your favour if prices drop, but it also means your bills could increase if market prices rise. Similarly to unit rates, your standing charge can also fluctuate depending on Ofgem’s energy price cap.
Here are some benefits of a variable rate tariff:
Flexibility – You're not tied to a set rate, so you'll benefit from lower bills if energy prices drop.
No exit fees – Many variable tariffs don't have early termination fees, so you can switch tariffs without worrying about extra costs.
And once again, there are some disadvantages:
Price uncertainty – Your bills can fluctuate, making it harder to budget, especially if prices go up.
Higher risk during price hikes – If market prices rise, you'll probably see a slight increase in your monthly bills.
The main difference between a fixed and a variable energy tariff is how your rates are charged. With a fixed rate, you know exactly what you'll be paying for each unit of energy over the length of your contract, while a variable tariff means your costs can change depending on global energy prices.
Here's a breakdown of the difference between tariffs at a glance:
Variable energy tariff | Fixed energy tariff |
Fluctuating rates Your unit rates and standing charges can go up or down depending on market conditions, so your bills might change. | Locked-in rates Your unit rates and standing charge stay the same for the duration of your contract, regardless of market price changes. |
No set contract length Variable tariffs are usually open-ended, giving you flexibility to switch providers whenever you want. | Fixed contract length Your tariff has a set end date, and you’re typically locked in for the agreed period. |
No exit fees You’re free to leave a variable tariff at any time without facing early termination fees. | Early exit fees If you want to leave your contract early, you may have to pay an exit fee. |
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Each tariff has pros and cons, and the best tariff for your household will mainly depend on how you use your energy and the level of flexibility you want.
For a larger household with high energy use, a fixed tariff can help you budget by locking in your unit rates so you pay around the same amount every month. These tariffs can protect you from rising market rates and come in a range of contract lengths, from six months to several years – so you can customise your tariff to suit your needs.
On the other hand, smaller homes that use less energy might prefer a variable rate that lets them benefit from lower prices throughout most of the year. These tariffs are also great if you rent and tend to move house a lot, as you're not tied into a lengthy contract and can switch providers if needed. However, the variable rates mean you could be left with higher bills if Ofgem’s energy price cap increases over the winter months.
If you don't know which type of energy tariff you're on, it's easy to find out. The quickest way is to look at your latest energy bill, which will usually say whether you're on a fixed or variable rate somewhere in the 'tariff details' section. You can also see this information by logging into your energy provider's online account. If you're a UW customer, you can find your tariff type by logging into 'My account'.
Want to know who provides your energy? Learn which energy provider your tariff is registered with here.
We get it: sorting out your utilities is nobody's idea of fun. And signing up for the first plan you come across can be tempting. However, choosing the right energy tariff is more than just picking whichever has the easier sign-up process. There are several things to think about before making your decision, as rushing into the wrong tariff could leave you paying more than you'd hoped for your energy.
In this section, we'll discuss four essentials to consider when shopping for a new energy tariff.
Your budget is the most important thing to consider when deciding between a fixed or variable tariff. If you like to know what you'll pay for your unit rate each month ahead of time, a fixed tariff is the way to go. While your bill will also depend on how much energy you use and is likely to fluctuate depending on the season, a fixed tariff can give you more of an idea of how much you’ll pay – compared to a variable tariff, where you won’t know your unit rate in advance.
This is great if you're trying to stick to a tight budget when energy prices are on the rise, but it also means you'll likely be paying more than the standard unit rate if energy prices fall.
If you've got a bit more flexibility in your budget and don't mind the occasional change to your monthly bill, a variable tariff might save you some cash when energy prices drop. Just remember, energy prices can go up, too – so it's worth thinking about how much wiggle room you've got in your budget to handle those changes.
How much energy you use can influence which type of tariff is right for you. If you use a lot of energy – maybe you have a big family or work from home – a fixed rate might help keep your bills manageable by freezing your rates so you don't have to worry about price jumps.
On the other hand, if your energy usage is lower because you live alone or spend a lot of time out of the house, a variable tariff could help you save when prices drop. These tariffs give you more flexibility to match your energy habits without locking you into a higher rate when you're using less.
Your energy meter is often the last thing on your mind, but it's important to consider when choosing a tariff. The type of meter you have can open up more options when choosing your plan, and certain tariffs might require you to upgrade your existing model.
Some newer tariffs require a smart meter, which automatically sends your energy usage to your provider. These meters make variable tariffs easier to manage because your bills always reflect your real-time usage. However, if you're renting, you may need to check in with your landlord before replacing your existing meter. Find out more about how smart meters work here.
Homes with a standard meter still have access to a range of fixed and variable tariffs but won't be able to use some of the latest, more flexible plans that smart meters offer.
If you have an Economy 7 meter, you'll still be able to switch tariffs, but you might lose the benefit of cheaper overnight rates and may need to replace your meter in some cases.
When choosing an energy tariff, look out for any loyalty deals or discounts your provider offers. For example, we at UW provide discounts for bundling multiple utility services, like broadband or mobile, alongside your energy plan. Want to learn more about how you can save by switching your services to UW? Check out our pricing options.
You might also find deals that reward long-term customers with discounted rates, offer special prices for signing up during a specific time period, or even give customers cashback on their everyday spending. Sign-up bonuses are another popular benefit, giving you breathing room on your first bill.
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If energy prices fall while you're on a fixed energy tariff, the amount you pay won't change – you'll continue to receive the same unit rate you agreed to when you signed up for the tariff. While you won't benefit from the lower prices, you'll still have the advantage of knowing exactly what your unit rates will be each month, and you'll also be protected when energy prices inevitably rise again.
If your payments have gone up unexpectedly, the first thing to do is check your meter to see if your usage has increased and find out if your provider has raised their rates.
If you're on a variable tariff, your bills will normally fluctuate with market prices, which might explain the price increase. However, if you're on a fixed tariff, your rate should stay the same, so it's worth contacting your provider to see if there's been a mistake if your usage isn't higher than usual.
When your fixed tariff comes to an end, your energy provider will usually move you onto a standard variable tariff automatically – unless you've already chosen a new plan. This means your rates could go up or down depending on market conditions, but you can always switch to another fixed tariff to lock in your rates again.
Not exactly. A fixed tariff means your unit rate – the price you pay for each unit of energy – stays the same throughout your contract.
However, the amount you pay monthly can still change based on how much energy you use. If your energy usage goes up (such as during the colder months when you're using your central heating), your bill could be higher, even though your unit rate hasn't changed.
Whether you'll be charged any exit fees when switching tariffs depends on your current energy contract. If you're on a variable tariff, you can usually switch at any time without worrying about additional costs. However, if you're on a fixed tariff, you may face early termination fees if you want to change before your contract ends.
If you’re a new customer and switching to one of our energy tariffs, we’ll give you up to £400 to put towards any early termination fees from your current suppliers when you bundle at least three services with us.
While choosing the right tariff is vital to keep your bills low, how you use your electricity and gas has a big impact on how much (or little) you pay at the end of the month.
Here are a few simple tips that could help you save:
Switch to smart power strips – If you use extension cables around your home to help you stay powered up, switching to smart power strips can save you money by automatically turning off devices that aren’t in use.
Use energy-efficient light bulbs – Lighting makes up 11% of your monthly energy bill, so it's worth thinking about when trying to lower your costs. Swapping out traditional bulbs for LED bulbs can use up to 80% less energy and last longer, saving on your electricity bill and replacement costs, so it's a win-win.
Take advantage of off-peak hours – If you're on a time-of-use tariff, like an Economy 7 plan, use appliances like dishwashers and washing machines during cheaper, off-peak times to make the most of lower rates.
Switch to a smart thermostat – These thermostats control your heating more closely, adjusting your temperatures based on when you're at home and when a room gets cold.
For more energy saving tips, check out our guide to learn how to make your home more energy-efficient.
Whether you're looking for the stability of a fixed rate or the flexibility of a variable plan, UW offers a range of competitive tariffs designed to suit your household's needs.
Discover more about our energy tariffs today and find the plan that works best for you.
Understanding gas and electricity costs:
Ever looked at your energy bill and wondered, 'What is a kWh?'. Don't worry, you're not alone.
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