Should I choose a fixed or variable energy tariff?
Fixed tariffs are currently cheaper than variable tariffs set by the energy price cap. Find out how fixed and variable energy tariffs work, so you can make an informed choice.
Updated on 5th August 2025 by:
Simon Wood, Head of Energy Pricing & Costing
Energy prices 2025 - latest guidance
From 1st July to 30th September 2025 the energy price cap for a typical dual fuel household paying by Direct Debit fell by 7% to £1,720 per year. This is a saving of £11 a month off gas and electricity bills. While variable rates have gone down, you could be saving even more by choosing a fixed tariff and locking in your rates. We’ve got some great fixed tariff deals that are cheaper than the latest price cap.
What’s more, if we launch a cheaper fixed tariff in the future, you can switch anytime for free. How to change your tariff online in just a few clicks. The price cap will change again on 1st October and while the energy market has been more stable recently, surprises can happen. Check out our price cap predictions for the latest guidance on energy prices.
What is the difference between a fixed and a variable energy tariff?
What’s a fixed rate tariff?
A fixed energy tariff means your unit rates and standing charge stay the same for the length of the contract you agree with your energy supplier.
Remember – it’s the cost per unit rate and standing charge that’s fixed and not your bill. How much you pay is based on how much you use and is worked out by multiplying the unit rates for gas or electricity by the amount used plus the standing charge.
To offer customers fixed price deals, energy suppliers must buy the energy they will supply over the length of the contract in advance. You, the customer, promise to stay with the supplier for a set period, so they have the confidence to buy enough energy to cover your contract upfront. Because the price can be locked in for the whole of the contract, your supplier can commit to giving you a fixed price for the energy you use. That’s why many suppliers charge exit fees to households who leave fixed deals early – because they could be left with energy that they’ve paid for and might need to sell at a loss.
What’s a variable rate tariff?
This is usually a supplier's default rate, or standard variable tariff. A variable energy tariff means that your unit rates and standing charge can increase or decrease. Suppliers might change the price of your unit rates and standing charge if the cost of wholesale energy changes, or if Ofgem - the UK’s energy regulator - changes the price cap. This means your bill could rise from month to month, even if you used the same amount of energy.
The main differences between fixed and variable energy tariffs
Fixed energy tariff
- You pay the same price for your unit rates and standing charge for the length of the plan
- Your contract length is fixed – so it has a set end-date
- If you leave a fixed energy tariff before the contract end date, there’s usually an exit fee. But with British Gas, you can switch between fixed tariffs for free
Variable energy tariff
- The price you pay for your unit rates and standing charge can go up or down
- Your contract is usually open ended
- No exit fees - you can switch to a new provider or pick a fixed tariff from your current energy supplier
What is the energy price cap?
Ofgem maintains an energy price cap which they review regularly. This sets a limit on the maximum amount that suppliers can charge for each unit of gas and electricity you use and sets a maximum daily standing charge (what you pay to have your home connected to the grid) for customers on a standard variable default tariff. Ofgem reviews and sets the price cap every three months based on the wholesale energy cost. Fixed-term tariffs are not covered by the energy price cap.
Which is better fixed or flexible (variable) energy?
Pros of fixed energy tariffs
- Peace of mind - if you’re on a fixed-term tariff and Ofgem increase the price cap, or your supplier announces a price rise, your prices won’t change
- Lots of choice – you can choose a short or longer contract length or lowest monthly cost. Some tariffs also come with additional benefits, or renewable options
- It can make costs easier to budget if you keep a careful eye on energy usage
Cons of fixed energy tariffs
- If energy prices drop when you’re on a fixed rate tariff, then you won’t get the benefit
- Most providers charge an exit fee if you leave a fixed rate contract before it ends. Ofgem has ruled that your energy supplier can't charge you any exit fees if you switch within the last 49 days (or seven weeks) of your contract (or from the date you received your Statement of Renewal Terms if earlier)
- You’ll need to act at the end of a fixed term tariff if you want to fix your energy prices again
What are the pros and cons of a variable energy tariff?
Pros of variable tariffs
- If wholesale energy costs fall, then the price of variable tariffs often falls too
- Variable plans don’t usually come with exit fees, so you have the flexibility to switch at any time
- If you’re on a standard variable default tariff you’re protected by the energy price cap, which is the maximum you can be charged for your energy use. The energy price cap is reviewed every three months by Ofgem - the energy regulator and can go up or down
- Your supplier will always give you advance notice before increasing your prices
Cons of variable tariffs
- If prices rise, so does the unit rate and standing charge you pay, so your bill will increase
- Can make it more difficult to budget
- If you choose a variable tariff, then it’s advisable to keep an eye on prices and consider changing to a better deal if prices rise sharply
Switch to a fixed tariff with confidence
Because if we offer a better fixed deal in future, you can swap to it for free.
Frequently Asked Questions
What is an energy tariff?
An energy tariff is how energy providers charge a customer for the gas and electricity they use. An energy tariff is made up of two costs which make up your bill:
- Unit rate – the price you pay for your electricity and gas which is charged at pence per kilowatt hours (p/kWh)
- Standing charge – a fixed daily cost for supplying energy to your home regardless of how much gas or electricity you use. It covers distribution and metering services – like line rental for energy - plus greener energy commitments, costs of failed suppliers from the Supplier of Last Resort (SOLR) process and help for vulnerable customers.
Need help to read your energy bill? Here’s another helpful guide to understanding your energy bill.
Should I fix my energy prices?
Choosing between a fixed or variable rate energy tariff is like choosing a fixed or variable mortgage deal, as both options have their benefits.
Ofgem recommends considering fixed deals1, especially if you prefer the security of knowing your price per unit of energy will stay the same for the duration of your tariff. Keep in mind that your bill amount can still vary based on usage.
Even if the cost difference between your current Standard Variable tariff and the available fixed tariffs is small, you’ll have peace of mind knowing your energy prices won’t rise.
My fixed energy tariff is ending, what should I do?
Your energy supplier will contact around 49 days before your current fixed energy tariff ends. They might offer some other fixed deals you can change to.
If you don’t switch to another fixed rate tariff, your energy supplier will automatically move you to a standard variable tariff.
What happens if prices fall, and I’ve fixed my energy tariff at a higher rate
No one wants to pay more for their energy than they need to. If you choose a new fixed price tariff with us, and we launch an even cheaper fixed price tariff in future because prices drop further, then you can swap to it for free.
If you stay on a variable tariff, then your prices could go up or down if Ofgem change the price cap.
Will I pay a fee for switching from a variable tariff to a fixed tariff?
If you’re currently on a standard variable tariff (SVT) you can usually switch to a fixed tariff without any exit fees.
If you’re with British Gas, there’s no fee for switching from standard variable rates to a fixed contract. You’re free to switch in your online account any time, and we’ll never charge you for making that change.
Is a flexible tariff the same as a variable tariff?
Yes, a flexible tariff is the same as a variable tariff. It means the amount you pay for your energy can go up or down every 3 months depending on changes in the cost of wholesale energy. If you’re a British Gas customer on a standard variable tariff, we’ll always give you notice before any changes take effect.