When choosing an energy tariff, one of the biggest decisions is whether to fix your prices or stay on a variable tariff.

A fixed tariff can protect you from future price increases.

A variable tariff can allow you to benefit if prices fall.

That can make the decision sound straightforward:

Think prices will rise? Fix.

Think prices will fall? Stay variable.

But it isn't quite that simple.

You don't know exactly what future energy prices will be, and the cheapest option today isn't necessarily the cheapest over the period you're comparing.

So rather than trying to predict the energy market perfectly, it can be more useful to ask:

What am I paying for the certainty of fixing — and what would have to happen for the variable tariff to become cheaper?

That's a comparison you can actually make.

What is a fixed energy tariff?

With a fixed tariff, the rates you agree to are normally fixed for the duration of the contract.

That generally means your:

unit rates

and

standing charges

remain fixed until the tariff ends.

Citizens Advice explains that changes in wholesale energy prices won't change the rates you've agreed during the fixed period.

But there is an important distinction.

A fixed tariff does not mean a fixed energy bill

This is one of the easiest things to misunderstand.

Imagine your electricity unit rate is fixed at:

25p/kWh

If you use:

2,000 kWh

your usage charge would be:

2,000 × £0.25 = £500

But if you use:

3,000 kWh

it becomes:

3,000 × £0.25 = £750

The price per unit hasn't changed.

Your consumption has.

So fixing your tariff doesn't mean:

“My energy bill will be £X for the next 12 months.”

It means the rates used to calculate that bill are fixed.

Your actual cost will still depend on how much energy you use.

What is a variable energy tariff?

On a standard variable tariff, the rates you pay can change.

For households covered by Ofgem's energy price cap, suppliers cannot charge more than the applicable capped rates for the unit rate and standing charge.

The cap doesn't limit your total bill.

Ofgem explains that the more energy you use, the more you'll pay.

The price cap is also reviewed every three months.

So a variable tariff can become:

more expensive

or

cheaper

over time.

Fixed vs variable: what's the real difference?

At its simplest:

Fixed tariff

You know the rates you'll pay during the fixed period.

Variable tariff

You know today's rates, but future rates can change.

That means the decision isn't purely about today's price.

It's partly about certainty versus uncertainty.

And certainty can have a price.

Let's compare a fixed tariff with a variable tariff

Consider an illustrative household using:

Electricity: 2,500 kWh/year

Gas: 9,000 kWh/year

Suppose it has two choices.

12-month fixed tariff

Estimated annual cost using that household's consumption:

£1,650

Variable tariff

Estimated annual cost at today's rates:

£1,600

At first glance, the variable tariff looks better.

It is:

£50 cheaper

But that £1,600 assumes the current variable rates continue.

They might not.

The fixed tariff's rates, meanwhile, are locked in for the agreed period.

So the £50 difference can be thought of another way:

How much are you effectively paying for price certainty?

At the starting rates in this simplified example:

£50/year

But whether that £50 proves worthwhile depends on what happens to variable rates.

Scenario 1: variable prices don't change

Suppose the variable tariff effectively costs:

£1,600 over the year

while the fix costs:

£1,650

Result:

Variable tariff cheaper by £50

In this scenario, fixing didn't save money.

You effectively paid more for certainty.

Scenario 2: variable prices fall

Suppose variable rates fall enough that the household's annualised cost becomes:

£1,500

while the fixed tariff remains:

£1,650

Difference:

£150

Now the variable tariff looks considerably better.

This is one of the risks of fixing.

Citizens Advice specifically notes that if energy prices fall, someone on a fixed tariff could end up paying more than they would on a standard variable tariff.

Scenario 3: variable prices rise

Now suppose variable rates rise sufficiently that the equivalent cost becomes:

£1,800

The fixed tariff remains:

£1,650

Difference:

£150

This time the fix wins.

That's the protection you're buying when you fix.

You give up some ability to benefit from falling prices in exchange for protection against increases in your contracted rates.

The problem: we don't know future variable prices

This is the critical point.

You can calculate exactly what a fixed tariff charges.

But you cannot know with certainty what a variable tariff will charge throughout the next 12 months.

Ofgem reviews the price cap every three months, and changes in underlying energy costs can feed through into future cap levels.

That makes a comparison between a 12-month fix and a variable tariff fundamentally different from comparing two fixed tariffs.

One side of the comparison contains future uncertainty.

A fair comparison should acknowledge that rather than hide it.

What does the current price cap tell us?

From 1 October to 31 December 2026, Ofgem's average Direct Debit rates across England, Scotland and Wales are:

Electricity: 26.32p/kWh

Electricity standing charge: 54.83p/day

Gas: 7.97p/kWh

Gas standing charge: 29.68p/day

The headline annualised price-cap figure is £1,723 for a typical dual-fuel Direct Debit household.

But that doesn't tell us what the price cap will be for the entire next year.

Ofgem's next scheduled cap announcement is for the period beginning January 2027.

So today's cap can be used to understand today's variable rates.

It shouldn't automatically be treated as a guaranteed 12-month variable price.

Why comparing £1,650 fixed with £1,600 variable can be misleading

Suppose a comparison says:

Fixed tariff: £1,650/year

Variable tariff: £1,600/year

It looks like the variable tariff saves:

£50

But ask:

What period does the £1,600 represent?

If it's simply today's variable rates annualised over 12 months, it isn't a prediction that you'll actually pay £1,600.

It's effectively saying:

If these rates remained unchanged for a year, this household would pay approximately £1,600.

That's useful information.

But it's not the same thing as a 12-month fixed price.

This distinction should be visible whenever the two are compared.

Can you calculate a break-even point?

Yes — and this is where the comparison becomes more useful.

Return to our example:

Fixed tariff: £1,650

Variable tariff at current rates: £1,600

Difference:

£50

The variable tariff therefore only needs to become £50 more expensive over the comparison period before the fixed tariff starts looking better.

In percentage terms:

£50 ÷ £1,600 × 100

= approximately 3.1%

So in a deliberately simplified full-year comparison, if the variable tariff's total annual cost rose by more than roughly 3.1%, the £1,650 fix would begin to outperform it.

But there's an important qualification.

If prices don't change until partway through the year, the required increase from that point would have to be larger because the higher price only applies for part of the comparison period.

Timing changes the calculation

Imagine the variable tariff remains at its current level for six months.

Only then does it rise.

The household has already benefited from six months at the lower price.

So the increase during the remaining six months must be greater to wipe out the fixed tariff's £50 premium.

This is why simply saying:

“The fix is only 3% above the price cap”

doesn't necessarily mean the fix wins if the next cap rises by more than 3%.

You need to consider:

when the change happens

and

how long the new rates apply.

That's a much more meaningful way to compare fixed and variable tariffs.

Don't forget that energy use is seasonal

There's another complication.

Most households don't use exactly one-twelfth of their annual energy every month.

Gas consumption in particular can be much higher during colder months.

That means a price increase occurring before a high-consumption winter period can have a different financial impact from the same increase occurring during summer.

So a very detailed fixed-versus-variable comparison may need to consider not just:

how much prices might change

but also:

when they change and when the household uses its energy.

That's another reason headline annualised figures need to be treated carefully.

What about exit fees?

Fixed tariffs can have

.

Variable tariffs generally give you greater freedom to move.

Suppose you choose a 12-month fix and energy prices fall sharply six months later.

You find a much cheaper tariff.

Leaving your fix might involve an exit fee.

That fee becomes part of the calculation.

However, if you're approaching the end of a fixed tariff, the rules are different.

With 49 days or less remaining, Citizens Advice says you can switch without paying the contractual exit fee.

So when considering a fix, don't just look at its starting price.

Also check:

How long is the fix?

Is there an exit fee?

How much is it?

How much flexibility am I giving up?

When might a fixed tariff make sense?

A fixed tariff may appeal if:

You value predictable rates.

Knowing the rates won't change during the fixed period can make budgeting easier.

The fix is competitively priced.

The smaller the premium over today's variable rates, the less prices need to rise before the fix becomes financially attractive.

You're concerned about future price increases.

A fix transfers some of that price risk away from you.

You're comfortable committing for the fixed period.

Especially if there are exit fees.

But none of these automatically means fixing is the cheaper decision.

When might a variable tariff make sense?

A variable tariff may appeal if:

You value flexibility.

You're not locking yourself into a fixed contract.

Current variable rates are materially cheaper than available fixes.

A larger fixed-tariff premium requires a larger future increase before the fix pays off.

You're comfortable with prices changing.

That includes accepting the possibility of increases.

You want to benefit if variable rates fall.

A fixed tariff can prevent you benefiting automatically from falling market-linked rates.

Again, this doesn't mean variable is inherently better.

It's a different balance of price and risk.

Don't try to predict the market perfectly

It's tempting to turn the fixed-versus-variable decision into a forecast:

Will wholesale gas prices rise?

What will Ofgem do next?

Where will the price cap be next summer?

Those questions matter.

But predicting them precisely is extremely difficult.

A more practical approach is to calculate the decision in terms of thresholds.

For example:

Fix costs £50 more at current rates.

Then ask:

How much would variable prices have to rise before fixing becomes cheaper?

And:

How much could variable prices fall before I regret fixing?

That doesn't remove uncertainty.

It makes the uncertainty measurable.

Compare fixed and variable tariffs using the same household

Whichever options you're considering, the fundamental comparison rule doesn't change.

Use:

the same household

the same energy consumption

the same comparison period

and

all relevant tariff charges.

That's how you avoid making one tariff appear cheaper simply because it has been calculated using different assumptions.

So, fixed or variable: which is better?

There isn't one answer for every household.

A fixed tariff offers something valuable:

certainty about the rates you'll pay.

A variable tariff offers something different:

the ability to benefit if rates fall, while accepting that they may also rise.

The important comparison isn't simply:

Fixed or variable?

It's:

What does the fixed tariff cost compared with today's variable tariff, how much would variable rates have to change before the winner changes, and how much do you value certainty?

That's a much more useful decision.

And sometimes the calculation will say:

Fix.

Sometimes:

Stay variable.

Sometimes the difference will be so small that either option is reasonable.

That's exactly how an impartial comparison should work.

Your energy tariff is a decision, not a prediction.

Likewise Compare is being built to compare your renewal with the alternatives using your own energy consumption and the tariff terms that actually determine what you pay.

The aim isn't to tell you that switching or fixing is always better.

It's to help you see the numbers clearly enough to decide.

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