What's the difference?

liquidstool_2

hello,

i've been checking switching electric suppliers and have had good savings, the best came in at a saving of £284 for normal and £240 for fixed. I'm a bit confused though, what's the difference between a "fixed tariff" and a "capped tariff"?

thanks

notbritishgas

liquidstool wrote: »

hello,

i've been checking switching electric suppliers and have had good savings, the best came in at a saving of £284 for normal and £240 for fixed. I'm a bit confused though, what's the difference between a "fixed tariff" and a "capped tariff"?

thanks

A fixed tariff means that prices per kwh remain the same for the duration of the contract. You could however pay more if you use more gas/electricity.
A capped tariff means the price per kwh can go down but cannot increase, once again for the duratuon of the contract.

Cardew

As explained above, capped prices can(in theory) come down - but rarely do.

Often they state a capped tariff is guaranteed to be at least, say, 6% below their standard tariff rate. However that capped tariff could be in the region of, say, 15% below the standard tariff when it was introduced. This means that they could reduce their standard tariff by, say, 8% and the capped tariff would not change as it is now 7% below the new reduced price standard tariff.

liquidstool_2

RIGHT, OK - SO WHAT'S THE BEST? given that the winter is on it's way and prices are bound to increse? and can a fixed tariff increase then?

Cardew

As explained in post#2 neither a fixed or capped tariff can increase during the term of the contract.

As a capped tariff could decrease, but is very unlikely to do so, there is not much difference between either tariff.

Don't forget you don't 'get owt for nowt'. Fixed/capped tariffs usually attract a penalty payment if you leave before the end of the term and some rquire you to run the account on line, pay by DD etc etc.

Pincher

It's just a shame there is no such thing as a Bank of England rate for energy prices; in which case you might see the term "collar" appearing down the line. People on capped rates will complain about a collar on prices the suppliers suddenly magic out of nowhere, so they don't have to lower prices too far. And everyone on a EDF 5 year fix will shoot themselves.

They say they found oil outside the Falklands.
Northsea bonanza number two, please.

Plushchris

liquidstool wrote: »

RIGHT, OK - SO WHAT'S THE BEST? given that the winter is on it's way and prices are bound to increse? and can a fixed tariff increase then?

Given that that capped tariffs are unlikely to come down, then the one thats "best" is probably whatever one is cheapest for you.

As said above, keep an eye out for exit fees, dont let them put you off - but keep them in mind if you decide you want to switch at a later date.

Tbh, exit fees on capped/fixed tariffs arent much of a problem if prices are likely to be going up because if the prices do go up, you are unlikely to want to switch away from your fixed rates anyway.

notbritishgas

liquidstool wrote: »

RIGHT, OK - SO WHAT'S THE BEST? given that the winter is on it's way and prices are bound to increse? and can a fixed tariff increase then?

Normally a fixed tariff carries a premium over their other tariffs, presumably as a safeguard for them in case the price of gas increases.
However just recently Scottish Power energy reward tariff (and perhaps some other suppliers?) has been figuring very near the top of the comparison sites, and this tariff is fixed until july 2011.
So are SP desperately trying to attract and hold on to their customers for a year or so or do they know something about the price of oil/gas??

Premier_2

notbritishgas wrote: »

Normally a fixed tariff carries a premium over their other tariffs, presumably as a safeguard for them in case the price of gas increases.
However just recently Scottish Power energy reward tariff (and perhaps some other suppliers?) has been figuring very near the top of the comparison sites, and this tariff is fixed until july 2011.
So are SP desperately trying to attract and hold on to their customers for a year or so or do they know something about the price of oil/gas??

Where there is no premium for a fixed tariff, it is usually because the supplier thinks prices will generally fall over the term of the contract.

(just like fixed mortgage rates)