Compare the whole tariff, not a headline monthly payment. For a Great Britain household, calculate expected annual electricity and gas costs from your own kilowatt-hour use, each fuel’s unit rate, each daily standing charge, the contract length and any exit fee. A fixed tariff buys certainty about agreed rates for a set term; it does not freeze your total bill. A standard variable tariff can change, but its covered unit rates and standing charges are limited by Ofgem’s price cap.
There is no universal answer to “fixed or variable?” A fix can cost more if variable rates fall, while a variable tariff can become more expensive if rates rise. The sound choice depends on how much certainty you need, how long you expect to stay, your usage pattern and the precise contract terms.
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What fixed and variable tariffs actually mean
Fixed tariffs lock rates, not your bill
On a fixed tariff, the supplier agrees a unit rate for each fuel and a daily standing charge for the contract term, subject to the stated contract terms. Citizens Advice Wales describes it this way: “A fixed tariff charges you the same rate for your gas or electricity and your standing charge, until your contract ends.”
Your bill still changes when your consumption changes. If you use more kilowatt-hours, you pay for more energy; if you use less, you pay less. A cold winter, a new appliance or a change in the number of people at home can therefore move the total even though the rates are unchanged.
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Standard variable tariffs can change
A standard variable tariff (often called a default tariff) does not promise one rate for the whole year. The supplier can change its unit rates and standing charges in line with its rules and applicable regulation. For covered household default tariffs, Ofgem’s price cap limits the maximum rates that can be charged during each cap period. The cap does not set one national bill: rates vary by region, payment method, fuel and meter type.
A variable tariff may become cheaper when the supplier lowers rates, but that outcome is not guaranteed. It can also become more expensive when allowed rates rise. A fixed customer does not automatically receive either benefit during the fixed term.
Fixed versus standard variable: the decision factors
| Comparison axis | Fixed tariff | Standard variable tariff |
|---|---|---|
| Unit rates and standing charge | Set for the agreed term, subject to the contract’s stated terms | Can change; the Ofgem price cap limits maximum rates for covered default tariffs |
| If market prices rise | Contracted rates do not move with ordinary market changes during the term | Rates may rise, subject to the cap and supplier rules |
| If market prices fall | You may continue paying the fixed contracted rates | The tariff rate may fall, but this is not guaranteed and the cap can also change |
| Leaving the tariff | An early-departure fee may apply; check the contract and dates | Customers can switch, with the main comparison risk being any fee attached to an existing fixed contract |
| Best cost input | Your expected annual use multiplied by the fixed unit rates, plus daily charges and any relevant exit fee | Your expected annual use and current rates, tested against possible later rate changes |
This table describes the risk trade-off, not a forecast. No current tariff comparison can establish which option will be cheapest over an uncertain future.
What Ofgem’s price cap does—and does not—do
Ofgem updates the price cap every three months. At the time covered here, the published period is 1 October to 31 December 2026. For exact rates, use Ofgem’s table for your region, payment method, fuel and meter type rather than relying on an old article or a national “typical” figure.
The cap applies to covered standard variable and default tariffs. It does not apply to fixed tariffs. It limits the unit rates and standing charges a supplier may charge under the cap; it does not limit the total amount your household can spend. Ofgem puts the distinction plainly: “It does not limit the cost of your total bill. The more energy you use, the higher your bill will be.”
Ofgem’s cap rules do not cover Northern Ireland, business energy contracts, heat networks or heating oil. This guide is for domestic household tariffs in England, Scotland and Wales. If you live elsewhere or use a different supply arrangement, check the rules of the relevant regulator.
Why standing charges can change the answer
A standing charge is a daily amount for having the supply, regardless of whether you use energy that day. It is charged on days when consumption is zero, so a household with low usage cannot assess a tariff from the unit rate alone.
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The House of Commons Library reported the following averages for Great Britain direct-debit customers under the October–December 2026 cap:
- Electricity standing charge: 54.8 pence per day.
- Gas standing charge: 29.7 pence per day.
- Combined standing charges: 84.5 pence per day.
- Standing charges represented an estimated 18% of a typical dual-fuel bill under that cap. This is not a universal percentage for every home.
At 84.5 pence per day, the combined charge is about £308.43 over 365 days (0.845 × 365), before any energy consumption is added. That calculation illustrates why a low-use household can be especially sensitive to standing-charge differences. The underlying figures are averages for that specific cap period, not a promise of the charge on every tariff or in later periods.
The same 2026 source cited Ofgem’s medium typical domestic consumption values of 2,500 kWh of electricity and 9,500 kWh of gas. These are reference values for comparisons, not a substitute for your own annual use and not a maximum.
How to calculate and compare annual costs
Use the same method for every offer. Keep electricity and gas separate until the final step, because each has its own unit rate and standing charge.
- Collect your inputs. Find your annual electricity and gas use in kWh from bills or your account. Record each offer’s unit rate (pence per kWh), daily standing charge, contract term, payment method, meter requirements and any exit fee.
- Calculate the energy charge for each fuel. Multiply annual kWh by the unit rate. Convert pence to pounds by dividing by 100.
- Calculate the standing charge. Multiply the daily charge in pounds by 365. If the contract starts or ends partway through a year, use the actual number of chargeable days for that comparison.
- Add the two fuels. Electricity cost plus gas cost gives the estimated dual-fuel annual cost. For a single-fuel home, calculate only the fuel supplied.
- Add an applicable exit fee. If comparing a switch that would end an existing fixed contract early, include the stated termination charge in the cost of switching. Do not add a fee that would not actually apply.
- Compare like with like. Match region, payment method, meter type, fuels, contract length and any time-of-use periods. A tariff that looks cheaper under different assumptions is not a fair comparison.
The core calculation can be written as:
annual cost = (electricity kWh × electricity unit rate) + (gas kWh × gas unit rate) + (365 × electricity standing charge) + (365 × gas standing charge) + applicable exit fee
Use pounds consistently in the final calculation. Treat the result as an estimate: your future use can change, and variable rates can be revised.
Use your own consumption, not the typical-household figure
A “typical annual bill” is a reference scenario based on assumed usage. It is not a ceiling on what your home can pay. A larger home, electric heating, poor insulation or a high-occupancy household may use much more; a small, efficient or occasionally occupied home may use much less. Suppliers may also quote different assumptions for payment method or meter type.
Do not compare monthly direct debits as if they were prices
A monthly direct debit is a payment arrangement. The supplier sets it from expected consumption and may adjust it to manage your account balance. Two suppliers can quote different monthly payments for similar tariff rates because they use different forecasts or account-balancing policies. Compare the underlying unit rates and standing charges, then consider how the payment schedule affects your cash flow.
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How to judge the risk of future rate changes
When a fix can be useful
- You need a predictable rate for budgeting and would struggle with a sudden increase.
- You expect to remain at the property for most or all of the fixed term.
- The fixed offer’s rates, standing charges and any exit fee are acceptable compared with the variable alternative on your own usage.
A fix transfers some rate-rise risk from you to the supplier for the agreed term. It does not protect you from higher consumption, changes in taxes or other contract terms that the agreement expressly allows.
When a variable tariff can be useful
- You want the ability to switch without being tied to a long contract.
- You can absorb a possible rate increase and prefer the chance to benefit if rates fall.
- You may move home or otherwise need flexibility before a fixed term would end.
Variable customers remain exposed to changes at each cap period or under the supplier’s applicable rules. A lower current rate is not a guarantee of a lower annual cost later.
Do not turn a forecast into a fact
Future wholesale prices, cap levels and household consumption are uncertain. A decision can use scenarios—such as “rates stay at today’s level,” “rates rise,” or “rates fall”—but each scenario is an assumption. The comparison should show how much you are paying for certainty and how much flexibility you retain, rather than claim to know the cheapest future option.
Exit fees and the timing of a switch
Check the fixed contract’s end date and termination clause before accepting another offer. Ofgem says a customer leaving a fixed tariff before its end may owe an exit fee. Citizens Advice says a no-exit-fee switching window applies when 49 days or fewer remain on a fixed contract; when 50 or more days remain, a fee may apply. The actual supplier contract controls, so confirm the amount and the date directly with the supplier.
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Switching checklist for a household
- Identify the current tariff. Record the tariff name, whether it is fixed or variable, the unit rates, standing charges, payment method and meter type.
- Record annual consumption. Use actual billed kWh for electricity and gas. If you have moved recently or your usage is unusual, note that the estimate is less certain.
- Check the fixed-term date. Find the end date and the exact exit-fee wording. Note whether you are within the 49-day no-fee window described by Citizens Advice.
- Obtain the complete new offer. Get rates for every fuel, daily charges, contract length, payment requirements, exit fee and any time-of-use periods in writing.
- Run the annual calculation. Apply your usage to each fuel, add 365 days of standing charges, and add an applicable termination fee.
- Check service and eligibility terms. Confirm that the tariff is available in your region and works with your meter, payment method and fuel combination.
- Submit the switch and keep records. Ofgem says the switching process generally completes within five working days. Save the confirmation, meter readings and final bill details.
If a switch is delayed or the final bill looks wrong, contact the supplier first with your confirmation and meter readings. Keep the complaint reference and escalate through the supplier’s published process if it is not resolved.
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Common comparison mistakes
Looking only at the unit rate
A low pence-per-kWh figure can be offset by a high standing charge, especially for a low-use home. Compare both charges for each fuel.
Treating the cap as a spending limit
The cap limits covered rates, not consumption or total spending. A household using more energy pays more even when its tariff is at the capped rate.
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Assuming “fixed” means a fixed monthly bill
Only the agreed tariff rates are fixed. Your kWh use determines the variable part of the bill.
Ignoring the exit fee
An apparently cheaper replacement can cost more after an early-termination charge. Check the contract and remaining term before switching.
Using a national average for a personal decision
Regional rates, payment method, meter type and actual use all matter. A national typical figure cannot reproduce your bill.
Comparing different contract conditions
Do not compare a dual-fuel direct-debit offer with a single-fuel or prepayment offer and call the difference a tariff saving. Align the conditions first.
Using comparison websites safely
Ofgem directs consumers to supplier information and energy comparison websites. The UK Government describes these websites as third-party intermediaries and warns that conflicts of interest, opaque contracting and mis-selling can occur. A comparison site may not display every tariff or may present incentives and fees differently.
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If you use one, verify the underlying supplier offer yourself:
- Check which suppliers and tariffs are included and whether the results cover your meter and payment method.
- Read the supplier’s terms for unit rates, standing charges, contract length and exit fees.
- Look for any commission, incentive or other commercial relationship and understand whether it changes the price you pay.
- Save a copy of the quote and the date, because rates and availability can change.
Standing-charge policy changes to watch
Ofgem has listed proposals and consultations concerning lower-standing-charge options, including a zero-standing-charge cap variant. These are policy developments, not proof that a particular option is currently offered to every household. Check Ofgem’s latest status before relying on them in a tariff decision. Do not carry October–December 2026 standing-charge figures into a later cap period without checking the newly published data.
A practical decision framework
Choose certainty when the budget risk matters most
A fixed tariff is more defensible when a predictable rate is worth paying for, the contract fits your expected time at the property and the calculated cost is acceptable without assuming future falls. Set aside money for higher consumption because the bill itself remains usage-driven.
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A standard variable tariff may suit a household that could move, wants to switch quickly or accepts rate volatility in exchange for avoiding a fixed-term commitment. Monitor the supplier’s notices and recalculate when rates change.
Recheck at the right moments
- When a fixed term is approaching its end.
- When a supplier announces a rate or standing-charge change.
- After a major change in occupancy, heating or appliance use.
- Before moving home or signing a new fixed contract.
At each review, repeat the same annual-cost calculation and include any fee that would actually apply.
Bottom line
Fixed and variable contracts solve different problems. A fixed tariff buys protection from ordinary rate changes for a defined term but can leave you paying more if variable rates fall and may charge for early departure. A standard variable tariff preserves flexibility and is subject to Ofgem’s cap on covered rates, but your rates can change and the cap does not limit your total bill. Use your own annual kWh figures, both unit rates and standing charges, the contract dates and any exit fee to make the comparison that fits your household.
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