Variable Rate Tariffs: Are they any good?

Guide to the Variable Rate Tariff

What’s in this guide?


As one of the most popular types of energy plans, you may have heard of a variable rate tariff.

But what are the pros, or perhaps most importantly the cons of this type?

This guide will tell you everything you need to know about the variable rate tariff, including what they are and whether they might be best for you.

What is a variable rate tariff?

A variable rate tariff is a type of energy plan that tracks the wholesale market, so your energy costs will rise and fall along with the prices in the market.

This can mean savings when the prices drop; however, it is true that some suppliers drag their heels when it comes to passing on these savings to their customers.

On the other hand, they will likely immediately increase your prices when they take an upward turn.

As energy prices are predicted to rise to around 30% in the next five years, it’s likely that you won’t see any significant savings by choosing a variable rate tariff.

But, there are some other benefits to having this type of tariff.

First, let’s take a look at what happens depending on your payment method.

If I’m on a monthly direct debit plan, will my prices change instantly?

As you might know, being on a variable rate plan means that your energy prices will increase and decrease with the open market.

If you have credit, which means you’ve overpaid for your energy in the past, you should have a kind of buffer or cushion should energy prices increase.

However, if your energy prices fall, then you can expect your monthly direct debit to decrease.

This can be complicated as if you are being undercharged for your energy; you may need to pay the same amount to catch up.

That’s why it’s essential to continually read your meter, to avoid being over or undercharged for your energy.

If I’m on pay as you go, will my prices change instantly?

You should be warned as soon as possible if you’re on a variable rate tariff and you pay as you go.

For some energy suppliers, you can expect a 30-day warning to get your finances in order before the prices increase.

Variable rate tariff pros

So, what are the benefits of opting for a variable rate tariff?

✔ Your energy prices could drop thanks to the open market
✔ You aren’t tied to a contract so that you can switch at any time
✔ Pay no exit fees with a variable rate tariff

Variable rate tariff cons

And what are the negatives to a variable rate tariff?

✗ Energy prices are expected to only rise in the next few years, making it unrealistic that you would produce significant savings with a variable rate tariff
✗ Your energy rates will increase sooner or later
✗ Energy suppliers have to adhere to certain government schemes and initiatives, which often means increasing prices for variable-rate customers

Does a variable tariff mean immediate price cuts?

Unfortunately, the answer is no.

As stated before, sometimes energy suppliers are hesitant to pass on savings to their customers.

Your bill is made up of many different factors including operational costs, government initiatives, distribution costs and of course, wholesale energy costs.

Because of this, your energy costs may not decrease at all – or, the fall in prices may be so small that you don’t notice it.

What happens to my contract if I want to switch energy supplier?

Luckily, when you are on a variable rate tariff, you can switch your energy suppliers at any time without incurring any fees.

That’s why you don’t usually ‘cancel’ a variable rate tariff. As your contract will give you the freedom to choose when and why you switch.

You can also generally upgrade to a fixed rate tariff at any time. This can lock you into a contract for several years, but it will likely save you money in the long run.

How to compare

First, what it is that you want the most in your supplier? Like customer ratings or range of services.

Now, you need to have some information to hand.

This will make it a lot easier to compare electricity and gas tariffs.

  • Your location
  • Annual consumption or spend
  • The size of your home
  • Email
  • Phone number

Then, use a reliable energy switching website which can show you the latest deals in under 60 seconds.


Are you ready to compare or switch energy suppliers?

Did you know that you could be saving over £200 annually on your energy bills every year?

Take a look at the EnergySeek guides to find out more about your energy, or see reviews of the top 7 energy switching sites to compare gas & electricity.