Understanding the Types of Energy Tariffs


The onset of the pandemic has been followed by a marked drop in energy usage as businesses shifted work online, which in turn led to reduced energy prices. However, as things are beginning to return to normal, the energy demand is slowly growing, and a rise in energy rates is expected. The best question to ask yourself in such a scenario is should I fix my energy prices until 2022 to protect myself from high rates in the coming months? Well, to answer that, you need to understand all available energy tariffs properly. Let’s get started.

What are the Different Types of Energy Tariffs?

Energy tariffs refer to contracts energy suppliers offer to their customers for their respective utility usage. With a wide variety of tariffs available, choosing one for your business may get heavily confusing. But don’t worry, we are here to get you sorted.

  1. Variable Rate Tariff

Variable-rate tariffs, or sometimes referred to as ‘standard variable tariffs,’ are among the most expensive types of tariffs. These tariffs have rates subjected to fluctuations in the wholesale energy market and the energy supplier’s verdict. As a result, the rates are mostly high in in-demand seasons, and consumers may suffer financial losses. On the other hand, when energy prices fall, consumers can save up a lot of money. This type of tariff is also the default tariff of most suppliers, and when consumers do not renew a different tariff, they are automatically shifted to this one. 

  1. Fixed Price Tariff

As suggested by its name, fixed price tariffs involve energy capping. Rates per kilowatt per hour are set for the entire period of the contract, which is typically 12 months. And, despite fluctuations in the energy market, consumers continue paying a fixed amount for their utility usage. Since this tariff protects consumers from energy rises, it is generally the most preferred choice of tariff. 

It is important to note that in this energy contract, the total chargeable amount is not fixed or the same for all the consumers. Instead, the rates are fixed, and hence the overall cost you end up paying depends upon the units you consume.

  1. Dual Fuel Tariff

Many suppliers offer both gas and electricity, allowing consumers to sign up for the dual fuel tariff. As this is a more convenient option, many consumers choose to have the dual fuel tariff. In this way, they are only required to deal with one energy provider and contact one place (instead of two) for any issues relating to pricing, meters, etc. 

In addition to this, some suppliers also offer marked discounts on dual fuel tariffs, further allowing consumers to save money. Convenient and cheap? Can we think of a better deal?

  1. Prepayment Tariff

In this type of tariff, consumers are required to pay for their energy usage before they begin using it. The prices are capped for at least six months. However, it is worthy of mention that prepayment tariffs are still relatively more expensive than fixed-price tariffs.

Most consumers using this type of tariff have debts on their accounts, and until those are cleared, they cannot shift to a different form of a tariff.

  1. Green Tariff

Green tariff is the most environmentally friendly option out there. It involves the supply of 100% renewable form of electricity. It does not include utilities like gas, as it is already green (though not renewable). Green tariffs currently have the cheapest energy rates. Moreover, these rates are offered in the form of both variable and fixed-rate plans. 

 

Jeff Campbell

Jeff Campbell is a husband, father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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