Standard variable vs fixed rate – which energy tariff should you go for?
Standard variable vs fixed-rate tariff – the fall in wholesale energy costs may mean our energy bills drop in the coming months

If you’re looking for the best gas and electricity deals, then one of the things you may be considering is whether you should go with a standard variable or fixed-rate energy deal.
In the past fixed-rate energy tariffs were usually cheaper than the default standard variable tariff. That all changed with the energy crisis.
But with wholesale gas prices falling, energy bills are set to fall from July as a result of the energy price cap being reduced.
If wholesale costs continue to fall, we may see energy suppliers once more launch fixed-rate tariffs, which lock in the unit price you pay for electricity and gas and remain unchanged until the fixed period ends.
Here, we explain what you need to know if you're considering a fixed energy tariff.
What is a fixed-rate tariff?
With a fixed-rate tariff, what you pay per energy unit used is fixed for a set period - typically 12 to 18 months. This guarantees the cost of your energy will not go up for a set amount of time.
Your monthly bill depends on how much energy you actually use, but you are protected from gas price rises, which when they go up, won’t affect how much you pay because you will have locked into a fixed price.
Once the fixed-rate deal ends, you are automatically switched to a standard variable-rate tariff.
Fixed-rate deals were typically used as a way to compete for new business, but the high energy costs mean providers haven't been able to provide enticing offers.
What is a standard variable energy tariff?
The standard variable rate means what you pay per unit of energy will fluctuate monthly depending on the wholesale price of energy. If prices go up, you pay more and if they drop, you may pay less.
You are not locked into a standard variable rate like you are with a fixed-rate deal.
Millions of people ended up on a standard variable rate because they simply forgot to switch after their fixed-rate deal ended.
Before the energy crisis, standard variable rates usually cost more than fixed-rate deals. But there was some protection provided by the energy price cap, which is updated every three months. It limits the unit price for gas and electricity that energy companies could charge.
But with bills spiralling out of control and the cap increasing to unaffordable levels, the government introduced the Energy Price Guarantee (EPG) to freeze the unit price of energy. It meant the typical household would pay around £2,500 a year for their energy use, and applies to anyone on a standard or default tariff, which is now the majority of us.
Importantly it doesn't replace Ofgem's price cap, which means standard variable tariff prices can ‒ and have ‒ fallen below the EPG level.
From July, the energy price cap is being reduced to £2,074 for the typical household. That will run until September, with energy analysts Cornwall Insight forecasting that the cap will drop again to £1,960 for the final three months of the year.
The verdict
Currently it is incredibly difficult to switch to a fixed-rate deal. Most suppliers simply aren’t offering them, except the odd exception like Ovo, which has a one-year fixed tariff for existing customers only.
As a result, most of us have little option but to continue on our lender’s standard variable tariff. However, with wholesale prices falling and the energy price cap dropping in July, it’s possible suppliers will soon feel able to launch cheaper fixed-rate tariffs.
For now, the best thing to do is sit tight.
John Fitzsimons has been writing about finance since 2007, and is a former editor of Mortgage Solutions and loveMONEY. Since going freelance in 2016 he has written for publications including The Sunday Times, The Mirror, The Sun, The Daily Mail and Forbes, and is committed to helping readers make more informed decisions about their money.
-
-
Octopus Energy relaunches energy tracker deal – we explain what you need to know and if it could save you money
If you’re an Octopus Energy customer, you may be able to save on your energy bills with the relaunch of its tracker deal. We look at how it works
By Sue Hayward • Published
-
Three energy firms pay £8m in switching compensation - has your provider paid out?
More than 100,000 customers have received compensation after changing providers, but is now a good time to switch energy suppliers?
By Tom Higgins • Published
-
Octopus Energy relaunches energy tracker deal – we explain what you need to know and if it could save you money
If you’re an Octopus Energy customer, you may be able to save on your energy bills with the relaunch of its tracker deal. We look at how it works
By Sue Hayward • Published
-
Three energy firms pay £8m in switching compensation - has your provider paid out?
More than 100,000 customers have received compensation after changing providers, but is now a good time to switch energy suppliers?
By Tom Higgins • Published
-
HMRC tax credit renewal packs: act quickly to avoid losing benefit payments
Households receiving tax credits will be asked to confirm their details to ensure they continue to receive their entitlement. Here’s everything you need to know to make sure you don’t miss out on up to £3,480 a year
By Tom Higgins • Published
-
Mobile provider rewards: how to earn up to £700
Your phone could be the key to unlocking hundreds of pounds worth of discounts and freebies that you don’t even know about. We reveal which mobile providers offer the best rewards
By Vaishali Varu • Published
-
How much do cooking appliances cost to run?
Energy-saving cooking tips from the Energy Saving Trust
By Katie Binns • Published
-
Virgin Media leaves thousands without broadband: are customers entitled to compensation?
Tens of thousands of Virgin Media customers were hit by broadband outages yesterday. We explain your rights if your broadband goes down
By Katie Binns • Published
-
Broadband switching service delayed - how it will eventually work and why it’s crucial to switch
A broadband switching service designed to make it easier to change to a cheaper or faster deal has been delayed. We explain how you can still avoid huge increases to your monthly internet bill
By Katie Binns • Published
-
Heat pumps: why you can claim a £5,000 government grant for longer
Why you now have more time to apply for a government grant towards getting a heat pump in your home
By Sue Hayward • Published