Energy Tariffs

Energy tariffs options

Article updated: Friday 22 May, 2009

Are you confused about which type of energy tariff to go for? The tariff you choose could make as much difference to your bills as your choice of supplier, so read our guide to make sure you get the best deal.

• 1. Online tariffs
• 2. Single fuel tariffs
• 3. Dual fuel tariffs
• 4. Capped prices
• 5. Green energy
• 6. Economy 7
• 7. Market tracker
• 8. Prepayment
• 9. Mix and match
• 10. Save on your energy bills

You can also read frequently asked questions, dealing with your most common queries, from cancelling direct debits to keeping your boiler insurance.

1. Online tariffs

Almost all energy providers now offer paperless, online-only tariffs. By agreeing to forgo traditional paper bills, you’ll not only be doing your bit for the environment by cutting out all that wasted paper, but you’ll also be able to make some great savings. For instance the cheapest in the market is British Gas (www.britishgas.co.uk) online energy tariff, WebSaver 6 offering discounts of up to £88.

Instead of a paper bill each month, you’ll receive an email when your payment is due. If you pay by direct debit you won’t need to do anything, otherwise you can log into your account online to pay your bill.

You’ll also be able to completely manage your account online, editing payment details and even entering your own meter readings.

Is this the tariff for me?

If you have easy access to the internet and like the control offered by being able to access your account online, a paperless, online-only tariff could save you loads on your energy bills.

Having to enter your own meter readings also eliminates the risk overpaying on an estimated bill and then having to wait weeks for a refund. It also makes you more conscious of the amount of energy you’re using each month and you’ll be more likely to cut down - reducing your bills and environmental impact even more.

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2. Single fuel tariffs

Getting your gas and electricity from separate suppliers is the traditional way of shopping for energy and many people still do this. While most people could make substantial savings by switching supplier and moving on to a duel fuel plan, you still need to do a full comparison for your postcode to be sure.

Both gas and electricity prices vary by supplier and region so while a duel fuel tariff with British Gas (www.britishgas.co.uk) might be the cheapest option in one part of the country, in another it might be better to take only your gas from them and your electricity from npower (www.npower.com), for example.

Is this the tariff for me?

If you find that the cheapest option for you is to take your gas and electricity from separate suppliers, and you’re not concerned about having to pay two different bills each month then go for single fuel tariffs.

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3. Dual fuel tariffs

In a bid to encourage customer loyalty, every major supplier now offers a dual fuel tariff with price reductions and discounts available to customers who take both their gas and electricity from the same company.

Dual fuel tariffs also make things simpler; you will have just one bill and one direct debit to deal with each month, going out to the same company and if you do have any problems or queries that you need to take up with your provider, you’ll just have the one company to deal with.

Because of the discounts offered to tempt you to sign up, it’s true that dual fuel tariffs are usually the cheapest option for many customers. However, you shouldn’t just assume that’s the case. Do a full search to see what’s on offer at your postcode in case there are any specialised companies offering low rates on single fuels.

Is this the tariff for me?

The discounts offered on dual fuel tariffs do mean that they’re often the best deal to be had. So if you’re looking for the cheapest gas and electricity around, an online only, dual fuel tariff will undoubtedly be the one for you.

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4. Capped prices

Energy prices do fluctuate and it is very difficult to predict whether or not they will be more or less expensive in two or four years - the typical time that a capped price tariff lasts.

Capped or fixed price tariffs work by guaranteeing that your monthly or quarterly bills won’t rise for a set amount of time. However, your price guarantee will cost you since capped tariffs cost more per unit of energy than other plans that could fluctuate.

You also have to think about the fact that while a capped plan might save you from any price hikes over the next couple of years; it will also stop you from taking advantage of any market price drops. And you’ll need to prepare for the possibility of a sudden price jump when your capped deal expires.

Is this the tariff for me?

If you want to be able to work on set budget for the next two to four years, and are willing to pay a little extra for the peace of mind and stability that a set monthly cost offers, then you should definitely consider a capped deal.

You still need to make sure that you compare different providers though, because most energy suppliers now offer a fixed rate tariff so you’ll need to look at the price you pay and the length of the deal.

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5. Green energy

Almost all energy companies now offer a green tariff of some form. While the actual gas and electricity pumped into your home won’t change, most green tariffs work by matching your energy consumption by putting energy from renewable sources back into the national grid.

All energy companies are required by law to supplying eight per cent of energy from green sources such as wind and wave energy. Some tariffs will supply more than this - but will charge you extra each month. Others will offer discounts to customers who sign up to green energy tariffs, and most will also donate money to some sort of “green fund” for further research into renewable energy.

Is this the tariff for me?

Green energy tariffs can be a great way of helping to offset some of the damage caused by your gas and electricity usage while also supporting “green” causes.

However, do your research and work out how much more than its eight per cent requirement your chosen supplier is doing. You should also look at where any money put into a “green” fund goes since some focus on finding new sources of renewable energy, some focus on building wind farms and wave energy generators while others concentrate on wildlife conservation.

If you want to go green and save money, make sure you know exactly what offers are available on your new tariff.

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6. Economy 7

Economy 7 tariffs use a two-tier meter - one to measure energy use at a higher rate during the day, and one to measure use during the cheaper “economy” hours at night.

Economy 7 customers pay a lower rate for their energy over seven night time hours to ease pressure on the national grid during the day when most people are boiling kettles, doing their washing and watching TV.

Although there are around six million people in the UK on Economy 7 tariffs, many of them do not use their energy efficiently and should be aiming to use at least 50% of their energy during the cheaper hours - otherwise they will end up with higher bills than those on standard tariffs.

Is this the tariff for me?

The best way to make an Economy 7 tariff work for you is to set your appliances to run on timers. Even if your washing machine and dishwasher don’t have built-in timers, you can buy external ones to plug them into and then simply set them to run after 1am.

A washing machine cycle costs around 9p running at the cheaper rate on an Economy 7 tariff, but is around 30p to run during the day so make sure that you’re disciplined in your usage.

Bear in mind though that Economy 7 probably isn’t a good choice of tariff for anyone with neighbours living below them who are not likely to be impressed by your washing machine’s spin cycle at 2.30 in the morning.

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7. Market tracker

Following complaints that energy suppliers were too slow to pass on price cuts in the wholesale energy market to consumers, some suppliers have since introduced “market tracking” tariffs.

These work in the same way as tracker mortgages that shadow the base rate. If you’re on a market tracker energy tariff the cost of your gas and electricity will be reviewed every three months, more closely following movements in the wholesale market - going down when they drop but also going up when prices increase.

Although price changes are linked to the Heren Energy Report, used to represent industry wholesale prices, fluctuations won’t exactly replicate those in the wholesale market.

Is this the tariff for me?

If you’re willing to risk price increases in the wholesale market being more closely mirrored in your quarterly energy bills, in exchange for any wholesale reductions also being followed, then a market tracker could be the right tariff for you. It’s a good idea to read up on pundit’s predictions for the energy market before signing up though.

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8. Prepayment

Because prepayment meter customers are unable to take advantage of online discounts, or combine their plan with money-saving direct debit payments, they often end up paying a higher rate for their gas and electricity than customers on credit meters.

This is very unfortunate since the majority of people on prepayment meters use them as budgeting tools because money is tight.

Although as a prepayment customer you won’t be able to switch online - an engineer has to visit your home to manually change your meter - according to Ofgem, prepayment customers stand to make the biggest savings by switching energy supplier.

Is this the tariff for me?

If you really think that you’ll lose control of your finances by giving up your prepayment meter, then it might be worth sticking with it. But you will be paying extra for your energy, so it might be worth contacting your energy supplier to see if they offer a tariff for vulnerable customers and people struggling to keep up with their energy bills.

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9. Mix and match

These tariffs aren’t mutually exclusive - for example, many green energy tariffs are also managed online, cutting down on the impact of all those paper bills. So you might find that by signing up to a paperless, online-only, green, dual fuel tariff, you’ll be able to make the biggest savings and help the environment at the same time.

Even once you know which type of tariff you want to go for, make sure that you compare energy suppliers to ensure that you still get the best deal.

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10. Save on your energy bills