December 8, 2022
A fixed-rate tariff means your unit price for gas and electricity will stay the same for the entire duration of your contract, whether it is 1 year or even 5 years. Whereas a variable plan means that your price per unit can vary throughout the time of your contract, depending on price movements and activity in the industry.
Fixed-rate tariffs are made to offer security from the volatility of the energy market, so if you lock in a low price, you can benefit from this for along period of time, but on the other hand, a person who chose a variable tariff could have their unit price increased dramatically throughout their contract time.
Of course, this makes fixed-rate tariffs sound too good to be true because it is. As your prices will not change, the general price of energy could drop, leaving you paying more than necessary and the person with a variable contract paying much less.
Unfortunately, there isn’t a simple answer to this question, as the energy industry is a constantly evolving entity that can change at any moment. So, depending on market reports and recent activity within the industry, the answer may change. There may be an extremely volatile period where the price will not settle, and prices can be going up or down day-to-day (like what is happening during 2022). Or there could be a very calm period where the prices stay relatively similar for long periods of time with small changes here and there.
Depending on the time of renewal, appetite for risk and market knowledge, you could take benefits from both contract types. We recommend you talk to an expert in the energy industry (such as the lovely people at DBS) to get some advice and find the right fit for you.
As prices are expected to carry on rising throughout the rest of 2022 and at least the start of 2023, fixing for price may be the best route for you to take, providing stability and shielding your business from any nasty spikes in prices that are expected to happen. There is no sure answer to how long these spikes and high prices will be around but creating a stable price for your business to work with for the next few years seems like the right thing to do.
If you are looking to renew your contract soon, you may be told that your fixed rate will be increasing, and this increase could be frighteningly high. This is where we come in, we can help you explore the market, investigate your energy requirement, and find the right option for the future of your business. Our experts are more than equipped to help you find stability and comfort throughout this energy crisis.