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Choose a fixed tariff for rate certainty, not because it is guaranteed to be cheaper. Choose a standard variable tariff when you can tolerate changing rates and want the possibility of benefiting when the cap falls. The right choice depends on your actual electricity and gas use, region, payment method, contract length, exit fees and—if you are considering a time-of-use plan—how much consumption you can move to cheaper hours.
This guide applies primarily to domestic customers in Great Britain (England, Scotland and Wales). Ofgem’s figures below do not apply automatically to Northern Ireland, business contracts or heat networks.
Fixed, variable and dynamic tariffs: what you are actually choosing
An energy tariff has two main price components for each fuel: a unit rate, charged for every kilowatt-hour (kWh), and a standing charge, paid for each day the supply is connected. Your bill is driven by both components and by how much energy you use.
| Tariff type | How rates move | What happens if market prices rise | What happens if market prices fall | Key trade-off |
|---|---|---|---|---|
| Fixed | The agreed electricity and gas unit rates and standing charges stay unchanged for the fixed term. | Your agreed rates are insulated from those rises during the term. | Your rates normally do not fall automatically; you may need to wait until the term ends or switch, subject to the contract. | Predictability in exchange for possible overpayment if prices fall. |
| Standard variable | The supplier can change rates under the tariff terms. In Great Britain, standard variable rates commonly move when the Ofgem price-cap period changes. | Your rates can increase at a subsequent cap or tariff change. | Your rates can fall when the relevant tariff is reduced. | More exposure to volatility, usually with greater ability to leave than a fixed contract. |
| Time-of-use or dynamic | Prices vary by time of day; a dynamic product may change hourly or more often. | Expensive periods can raise costs if you must use electricity then. | You can benefit by shifting flexible use into cheaper periods. | The value depends on your usage pattern, meter and ability to change when appliances run. |
A fixed deal stabilises the rate, not the total bill. If your consumption increases, your bill can still rise. Ofgem puts the price-cap point plainly: “It does not limit the cost of your total bill. The more energy you use, the higher your bill will be.”
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Understand the current price-cap context
For 1 October to 31 December 2026, Ofgem lists a cap level of £1,723 per year for a typical Direct Debit, dual-fuel household in England, Scotland and Wales. That is 4% higher than the previous cap period. It is an illustrative annual level based on typical consumption—not a maximum bill for every household.
Ofgem’s published average Direct Debit rates for that period are:
| Fuel | Unit rate | Daily standing charge |
|---|---|---|
| Electricity | 26.32 pence per kWh | 54.83 pence per day |
| Gas | 7.97 pence per kWh | 29.68 pence per day |
The figures are rounded averages, not one universal rate. Regional rates and payment-method rates differ. The published note says gas figures include 5% VAT; electricity has no VAT from 1 October 2026 through 31 March 2027. Use the rate for your own region and payment arrangement when comparing an offer.
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Ofgem recalculates the cap every three months. Its calculation includes wholesale energy, network costs, policy schemes, supplier operating costs and earnings, headroom and VAT. Those components can move up or down, so a future cap is not predictable from the current figure. Customers on a fixed tariff are not protected by—or automatically charged according to—the cap while their agreed fixed contract remains in force.
Collect the inputs before comparing plans
Use annual consumption, not a monthly direct-debit quote
Find the last 12 months of meter readings or bills and record electricity and gas separately in kWh. If you have moved home or changed heating, use the most representative period available and flag the limitation. A monthly direct debit is a payment arrangement that may include credit or debt from earlier months; it is not a complete description of the tariff’s cost.
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Record the details that change the price
- Your supply region in England, Scotland or Wales.
- Whether you pay by Direct Debit, standard credit or another method shown in the offer.
- Electricity and gas annual kWh use.
- Each fuel’s unit rate and daily standing charge.
- Contract start and end dates, renewal or default-tariff terms, and any exit fee.
- Meter type and, for time-of-use products, whether it can record the required intervals.
Do not compare an electricity-only quote with a dual-fuel quote as if they were the same product. Check whether discounts, paper-billing charges or payment-method conditions are included in the displayed rates.
A step-by-step method for comparing offers
- Estimate your annual cost on your current tariff. Multiply electricity kWh by the electricity unit rate and gas kWh by the gas unit rate. Add each fuel’s standing charge multiplied by the number of days in the year. Include any tariff-specific discounts or fees on the same basis.
- Apply the same usage to every new offer. Suppliers may show an estimated annual cost using their own assumed consumption. Replace that assumption with your meter-based electricity and gas figures so that the comparison is like-for-like.
- Check unit rates and standing charges separately. A low unit rate can be offset by a high standing charge, particularly for a low-use home. Conversely, a lower standing charge may matter less to a high-use home than a materially lower unit rate.
- For a fixed plan, calculate the whole fixed term. If the term is 12 months, an annual estimate is usually sufficient. For a longer term, calculate each year using the contract rates and state any assumption about unchanged consumption. Include an exit fee in the decision even if you do not expect to leave.
- For a variable plan, model more than one scenario. Calculate the bill at the current rates, then test plausible increases and decreases in the unit rates and standing charges over the period you are considering. These are scenarios, not forecasts of the next cap or wholesale market.
- Check what happens at the end. Identify the end date, the supplier’s notice process and the tariff you would move to if you do nothing. A cheap fixed term can become expensive if it rolls onto an unattractive default tariff.
- Read the exit clause before switching. Confirm the fee for each fuel, when it applies and whether the supplier waives it in any circumstances. Do not assume that every fixed tariff charges a fee or that fees are the same across suppliers.
The basic annual-cost formula
For each fuel, use:
annual cost = (annual kWh × unit rate) + (daily standing charge × days) + other stated charges − discounts
Keep electricity and gas calculations separate until the end. This reveals which fuel drives the difference and prevents a cheap electricity rate from hiding an expensive gas rate.
Worked example using the October–December 2026 reference rates
The following is an illustration, not a quote or a typical-use claim. Assume a Direct Debit household in Great Britain uses 2,000 kWh of electricity and 8,000 kWh of gas in a year, and apply Ofgem’s published average rates for 1 October–31 December 2026.
| Calculation | Amount |
|---|---|
| Electricity: 2,000 kWh × £0.2632 | £526.40 |
| Electricity standing charge: £0.5483 × 365 days | £200.63 (rounded) |
| Gas: 8,000 kWh × £0.0797 | £637.60 |
| Gas standing charge: £0.2968 × 365 days | £108.33 (rounded) |
| Illustrative total | £1,472.96 |
Your result will differ with region, payment method, meter readings, rate precision, discounts and consumption. The example demonstrates why the £1,723 cap level cannot be treated as your personal bill ceiling: the cap’s annual figure is based on a defined typical-use profile, while your bill follows your own kWh.
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Test the decision against price volatility
If prices rise
A fixed tariff can protect the contracted rates for the fixed period, so the value is clearest when a rise would otherwise materially increase your bill. Protection is not free: the supplier prices the risk into the fixed offer, and you may pay more than a variable customer if the rise does not occur.
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If prices fall
A variable customer can see rates fall when the relevant tariff changes. A fixed customer normally keeps the agreed rates until the term ends. Leaving early may trigger a fee, so compare the possible saving with the fee and the remaining months of the contract.
If prices move unpredictably
Use a range rather than a single guess. Compare the fixed offer with a low, middle and high variable-rate scenario over the same term. Ask how much extra you would willingly pay for certainty and whether your budget could absorb the high scenario. This turns a market prediction into a risk decision you can make honestly.
| Question | Favors a fixed tariff | Favors a standard variable tariff |
|---|---|---|
| Can your budget absorb a higher bill at short notice? | No; predictable rates have high value. | Yes; flexibility may be worth the exposure. |
| Do you expect to move home or need to leave soon? | Only if the contract permits a low-cost exit. | Usually more suitable, subject to the actual terms. |
| Would a fall in rates matter more than certainty? | Less suitable if you want immediate benefit from falls. | More directly exposed to reductions. |
| Is your consumption likely to change? | Rates are fixed, but a higher or lower bill still follows your kWh. | Both changing rates and changing use affect the bill. |
Account for exit fees and switching dates
Citizens Advice says a fixed tariff usually lasts 12 months, although longer terms are possible. Its consumer guidance says that when 49 days or fewer remain, you can switch for free; with 50 days or more remaining, an exit fee might apply. Treat that as general guidance and check your contract, because the exact fee and waiver conditions are product-specific.
Ofgem’s consumer research, based on a 2024 survey summarized in 2025, found that 88% of respondents recognized that leaving a fixed tariff early may involve an exit fee. Ofgem cautions that the result reflects respondents’ knowledge and memory, and understanding was lower for more specific situations. The finding supports explaining the risk clearly; it does not establish that every fixed tariff has a fee.
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Before signing, save the tariff’s terms and note:
- The last date on which you can switch without a fee.
- The fee per fuel and whether it is charged once or for each fuel.
- Any circumstances in which the supplier waives the fee.
- How much notice is required and whether a switch can complete after the fixed term.
- The tariff that applies if you do not renew.
Why standing charges deserve equal attention
Standing charges are payable each day even when you use no energy. A high charge therefore has a larger percentage impact on a low-usage household. As consumption rises, the unit rate contributes more of the total. Compare both numbers rather than selecting the plan with the lowest headline unit rate.
For example, a difference of 10 pence per day in standing charge is about £36.50 over 365 days. A difference of 1 pence per kWh is £10 for every 1,000 kWh consumed. Those simple conversions help you judge whether a quoted unit-rate saving outweighs a standing-charge increase for your household.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.When a time-of-use or dynamic tariff may fit
A time-of-use tariff sets different prices for defined periods. A dynamic tariff can change hourly or more often. They may suit a household with an electric vehicle, battery, storage heating or other flexible loads that can run when prices are lower.
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Check these requirements first
- Whether the plan requires a smart meter or a particular meter configuration.
- Which hours are cheap and how often prices change.
- Whether prices are published in advance or can move with little notice.
- How standing charges, balancing charges and any additional fees work.
- How much of your current demand is genuinely movable without reducing comfort or safety.
Compare a time-of-use offer using an hourly or half-hourly usage profile where available, not just annual kWh. If you only know annual usage, the result may be misleading because two homes with the same annual total can have very different peak-time costs.
Common comparison mistakes and how to avoid them
Treating the cap as a personal spending limit
The cap limits covered unit rates and standing charges, not the total amount you can be billed. Higher consumption produces a higher bill, and the cap does not govern a fixed tariff during its agreed term.
Comparing only monthly payments
Direct-debit amounts can be adjusted, smoothed across seasons or affected by an existing account balance. Compare rates, standing charges and annual kWh first; use the monthly payment only to assess cash-flow impact.
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Ofgem publishes regional and payment-method differences. A figure from a national average or a different payment method can produce the wrong conclusion for your address.
Ignoring the end-of-term rate
A fixed offer that looks attractive for 12 months may be followed by a less competitive default tariff. Put the end date in your calendar and begin comparing before the contract expires.
Assuming a fixed bill cannot change
The rate is fixed, but your kWh is not. Weather, occupancy, appliance use and heating choices can all change the bill.
Assuming every exit fee is identical
Fees and waiver rules vary by contract and timing. Read the specific terms instead of relying on a general statement about fixed deals.
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A practical decision framework
- Set your risk preference. Decide whether avoiding an unexpected rate rise is worth paying a premium that may look expensive if prices fall.
- Calculate with your own data. Use separate electricity and gas kWh, current rates and standing charges, and the same assumptions for every offer.
- Stress-test the variable option. Model increases and decreases over the proposed fixed term; label them scenarios rather than predictions.
- Price the exit. Include possible fees and the chance that you will move, change meter type or need to leave early.
- Check flexibility. If considering time-of-use pricing, map when you actually use energy and confirm meter eligibility before valuing an off-peak rate.
- Schedule a review. Record the contract end date, switching deadline and the tariff that applies afterward.
There is no universal winner. A fixed tariff is a form of insurance against rate movement; a variable tariff keeps you exposed to both falls and rises; a dynamic tariff exchanges a simple rate for a usage-management task. The most defensible choice is the one whose costs you have calculated on your own consumption and whose risks your household can manage.
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Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
