Understanding energy tariffs can be a bit confusing

Discover the different between energy tariffs

So let me explain the difference between fixed and variable energy tariffs.

A fixed energy tariff is a type of energy plan where the price per unit of energy - such as kilowatt-hours (kWh) - is fixed for a period of time. This means that no matter how much energy you use, the price per unit remains the same. This type of tariff is ideal for those who want the peace of mind of knowing how much they will pay for their energy each month.

A variable energy tariff, on the other hand, is a type of energy plan where the price per unit of energy is subject to change. This means that the price you pay for your energy is not fixed and can be higher or lower than the fixed tariff. This type of tariff is ideal for those who can be flexible with their energy usage, as they can take advantage of lower prices when they become available.

I hope this helps to explain the difference between fixed and variable energy tariffs. If you have any more questions, please don't hesitate to ask.

"Hello everyone, and welcome to another Whiteboard Friday with UtilityKing. Last week, we discussed a variety of topics that you should be aware of and consider when selecting an energy tariff. What we thought we'd do for you this week is a little surprise, a little mix up: we'll start with a very easy explanation and for those of you who think that's enough, you can do something else for the others remain with us and we'll get into a funky geek mode.

So, starting with the simple piece, what we will be looking at is if we start with a variable pricing it simply means: the price that you see when you pick your tariff might move up or down based on the suppliers moving up or down their rates as a consequence of the wholesale market regulation… The fixed price, on the other hand, is set in stone for a specific length of time. However, you cannot quit that set pricing early. You will be charged termination costs if you do. So that is the concern you must have.

For the rest of you that are interested in Geek mode action, here it is... Never let it be said that we don't treat you all equally. Here we go in nerd mode we are. Trying to describe how hedging works, which is what this is, is quite difficult. , to the world, at the level of a person to the level of a person at the level of a person at the level of a person at the level of a person at the level of a person. That tank of energy resides in the ocean of fluctuation that the provider experiences when he purchases much more electricity and gas.

The intriguing thing is that in order to fill your tank, providers have purchased power and gas over time, and these tend to sink to the bottom, to take an analogy from water. What it seems to imply is that all of this purchased power and gas leaks out as time passes. It is subsequently replaced by new electricity and gas, which the provider is continually replenishing at the top end.

The result is a slew of distinct figures indicating the various purchases made by the provider. That money is always pouring out of the plug hole and being replenished here. This is being filled from the market, hence the price is market. You have no idea how much they pay for their bill at the bottom, how much is at the bottom, and how much flows out. So there's a lot of mystery and excitement in figuring out what the numbers are here. But that is what a variable tariff is, and you may enter and exit the pool whenever you choose.

We shift over to a fixed contract, a fixed deal is significantly different. Here you have different varieties of water at different rates and here you have one load of water, a still bottle of water possibly if you like; it's all bought on the same day, you receive your set price, it won’t alter. It is not being replenished at all. When your deal expires, the entire thing vanishes, and you have the option of sitting with an empty tank, getting a new fixed deal, or returning to the variable pot.

To be honest, the major reason someone would want to go the variable approach is because you don't know how much is going out here and what the pricing is for the things that is going out. The wording is a little different, but it's the same idea.

If we had an impartial index or benchmark of the energy price market, you could always say, "Well, my variable agreement is indexed against X," and you'd always know how good, terrible, or different it was. But because there is no analogue of the energy market to the Bank of England base rate, the whole process is basically a function of a supplier coming up with a figure, which presumably explains why they all miraculously tend to alter their rates at the same time.

With this set pricing offer, you know how much you're going to spend, but if the market price decreases, you'll still pay the same amount, so there are some factors to consider.

So, hopefully, it provides you a better understanding of how variable and fixed tariffs function. Instead of gazing at a tank with Nemo in it, we'll look at Green energy prices next time; till then, catch you later, bye!"


Now you understand that using the free energy price comparison tool of UtilityKing will not only help you to compare energy suppliers but also bring you the options to select the best electricity provider in your area. UtilityKing is also able to help you with energy switch to ensure that you will get the best energy deals from the cheapest energy supplier.

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