KiloWiseEnergy tariffs explained: fixed vs variable vs time-of-use (US/UK/CA/AU)
KiloWise editorial team · Last updated 5 November 2026 · Category: Bills & Tariffs
Your tariff is the deal you are on: the price you pay for each unit of energy, the fixed charge you pay for being connected, and the rules that decide when those prices can change. Two households can use exactly the same amount of energy and pay different amounts, simply because they are on different tariffs. That is why the tariff matters as much as the usage.
This guide explains the three tariff types you are most likely to meet — fixed, variable and time-of-use — what a standing charge does to your bill, and how a tariff change shows up in the numbers. It covers the United States, the United Kingdom, Canada and Australia in one page, and it ends with a checklist to run before you switch.
Before you compare anything, pull your current numbers from your bill. Our guide to how to read your energy bill shows you where to find your kWh use, your unit rate and your standing charge, and the bill audit tool will show you how a different rate would change your bill. A tariff comparison without your own usage is just a comparison of headlines.
Fixed tariffs: one price, locked in
On a fixed tariff, your unit rate and your standing charge are locked for a set period — often 12 months, sometimes longer. Your bill can still go up or down, because it depends on how much energy you use, but the price per unit does not change during the fix. That certainty is the point: you know what each kWh will cost next month, and you are protected if market prices rise during the fixed period.
The trade-off is that you are also locked out if prices fall. If market rates drop during your fix, you keep paying the higher fixed rate until the term ends. Fixed tariffs often carry an exit fee if you leave early, so check that fee before you sign.
Variable tariffs: the price can move
On a variable tariff, your unit rate and standing charge can change, usually with notice — often 30 days, depending on your country and supplier. In the United Kingdom, the most common variable tariff is the standard variable tariff, sometimes called the default tariff, which is the tariff you are put on when a fixed deal ends and you do nothing. In the United States, the equivalent is usually a variable-rate plan or a month-to-month plan from a competitive supplier, where one exists.
Variable tariffs have no exit fee in most cases, so you can leave at any time. That freedom is their main advantage. Their main disadvantage is uncertainty: if wholesale prices rise, your rate can rise too, and your bill rises with it even if your usage stays exactly the same.
In the United Kingdom, variable default tariffs are covered by the Ofgem price cap, which limits the unit rates and standing charges a supplier can charge on those tariffs. For October to December 2026, the cap set electricity at 26.32p per kWh with a standing charge of 54.83p per day, and gas at 7.97p per kWh with a standing charge of 29.68p per day, with a typical dual-fuel household paying £1,723 a year on direct debit at GB average rates. The cap is a ceiling on those rates — it is not a cap on your total bill, which still rises with your usage. The next cap was due to be announced on 25 November 2026. Rates vary by region and supplier, so check your bill rather than assuming the cap rate is your rate.
Time-of-use tariffs: cheaper at some hours, dearer at others
A time-of-use tariff charges different rates at different times of day. Electricity is usually cheapest overnight, when demand is low, and dearest in the early evening, when demand peaks. Some tariffs have just two rates — a day rate and a night rate — while others have three, adding a cheaper off-peak period in the middle of the day or a dearer peak period in the morning.
These tariffs only save you money if you can shift real use into the cheap hours. Running a dishwasher, washing machine or electric vehicle charger overnight is the classic example. But if most of your use is in the evening peak — cooking, lighting, television, heating — a time-of-use tariff can cost you more than a flat rate, because the peak rate is higher than the single rate you would otherwise pay.
The standing charge: the part you cannot use less of
Every tariff has a standing charge as well as a unit rate. It is the fixed daily or monthly charge for being connected — the wires, the meter and the billing — and you pay it even if you use no energy at all. It is called a standing charge in the United Kingdom, a customer or service charge in the United States, a basic or fixed charge in Canada, and a daily supply charge in Australia.
The standing charge changes the maths of every comparison. A tariff with a low unit rate and a high standing charge favours heavy users: the cheap units outweigh the fixed cost. A tariff with a higher unit rate and a low standing charge favours light users: the fixed cost stays small. That is why comparing unit rates alone is misleading — you must compare the total for your usage.
In the United Kingdom, the Ofgem price cap for October to December 2026 set the electricity standing charge at 54.83p per day. Over a 30-day month that is 54.83p × 30 = £16.45, before you have used a single kWh. VAT on domestic electricity in the United Kingdom was 0% from 1 October 2026 to 31 March 2027.
How a tariff changes your bill
A tariff changes your bill in exactly two ways: through the unit rate, which scales with how much you use, and through the standing charge, which does not. The formula is simple, and it is worth doing by hand once so you trust it.
Take your monthly kWh, multiply it by your unit rate, then add the standing charge for the number of days in the period. That gives your bill before tax and any other charges. Change either number in the formula and you can see the effect immediately: a higher unit rate hurts heavy users most, and a higher standing charge hurts light users most, because the fixed cost is spread over fewer units.
| Monthly electricity use | Energy charge at 26.32p/kWh (UK cap) | Standing charge at 54.83p/day × 30 days | Total before tax |
|---|---|---|---|
| 200 kWh | £52.64 | £16.45 | £68.09 |
| 280 kWh | £73.70 | £16.45 | £90.15 |
| 400 kWh | £105.28 | £16.45 | £121.73 |
The table uses the UK Ofgem price-cap rates for October to December 2026 as a labelled example. Notice that the standing charge is the same £16.45 in every row, while the energy charge grows with use. Going from 200 kWh to 400 kWh doubles the energy charge but raises the total by £53.64, not by double — because the fixed part never moves.
Worked example: the same home on a US average rate and a UK cap rate
Take a household using 800 kWh of electricity in a month. In the United States, at the average residential rate of 18.19 cents per kWh for January to July 2026, the energy charge is 800 × 18.19 cents = 14,552 cents, which is $145.52 before any fixed charge or tax. That sits close to the US average monthly bill of $144 in 2024, which covers the whole bill, not just the energy charge — a reminder that averages are a sense-check, not a prediction for your home.
Now the same 800 kWh in the United Kingdom, at the October to December 2026 cap rate of 26.32p per kWh: 800 × 26.32p = 21,056p, which is £210.56 for the energy, plus the standing charge of 54.83p × 30 days = £16.45, giving £227.01 before tax. VAT on domestic electricity was 0% from 1 October 2026 to 31 March 2027, so no VAT is added in that window.
FORMULA: (kWh used × unit rate) + (standing charge per day × days in period) = bill before tax and other charges
Result: $145.52 of energy charges in the US example, and £227.01 in total in the UK cap example, for the same 800 kWh. The difference is the rate, not the usage — which is exactly why comparing tariffs means comparing rates for your usage, not comparing headlines.
Country notes: the US, the UK, Canada and Australia
United States. In many states you buy electricity from a single regulated utility at a regulated rate; in others you can choose a competitive supplier. Where choice exists, fixed and variable plans are both common, and time-of-use plans are offered by some utilities, often with a smart meter. The US residential average was 18.19 cents per kWh for January to July 2026, according to the US Energy Information Administration, and the average monthly bill was $144 in 2024. There is no national price cap; rates are set state by state, so your bill is the only reliable source for your rate.
United Kingdom. You choose your supplier, and you can be on a fixed tariff or a standard variable tariff. Default tariffs are covered by the Ofgem price cap, which changes every three months and limits unit rates and standing charges — it does not limit your total bill. The next cap was due to be announced on 25 November 2026, so a rate quoted today may not be the rate in force next quarter. Always check whether a quote is a fixed rate or a capped variable rate.
Canada. Electricity is regulated province by province. Some provinces use time-of-use pricing with on-peak, mid-peak and off-peak rates; others use a flat rate or a tiered rate that rises after a usage threshold. There is no single national rate to quote, so your provincial regulator and your own bill are the sources to use.
What to check before you switch
Run this checklist before you agree to any new tariff. First, what is the exit fee on your current tariff, and what is the exit fee on the new one? A fee can erase the first months of saving. Second, is the new rate fixed or variable, and for how long? A fixed rate that ends in three months is not the same as one that lasts a year.
Third, compare the total, not the unit rate. Take your last twelve months of kWh — or your last three bills, if you do not have a year — and run each tariff's unit rate and standing charge through the formula above. The cheapest unit rate can still lose if its standing charge is high and your usage is low. Fourth, if it is a time-of-use tariff, check the hours and ask honestly whether you can shift use into the cheap period.
Fifth, check what happens when the deal ends: will you roll onto a standard variable tariff, and at what rate? Sixth, check whether any grant or rebate changes the decision — see our guide to energy grants and rebates: what to check before you spend. Finally, fold the comparison into your whole-home energy audit plan.
Frequently asked questions
Is a fixed or a variable tariff better?
Neither is always better. A fixed tariff gives you price certainty for a set period, which helps if prices rise; a variable tariff gives you freedom to leave at any time, which helps if prices fall. Compare the total for your usage, check the exit fee, and choose based on whether you value certainty or flexibility more.
What is a standing charge, and can I avoid it?
It is the fixed daily or monthly charge for being connected to the network, and you cannot avoid it while you have a supply — you pay it even if you use no energy. You can reduce its share of your bill only by choosing a tariff with a lower standing charge, which usually means a higher unit rate, so compare the total for your usage.
Does the UK price cap limit my total bill?
No. The Ofgem price cap limits the unit rates and standing charges on default tariffs — for October to December 2026, electricity was capped at 26.32p per kWh with a 54.83p per day standing charge. Your total bill still rises with how much energy you use, and rates vary by region and supplier.
Is a time-of-use tariff worth it?
Only if you can shift real use into the cheap hours, such as running a dishwasher, washing machine or electric vehicle charger overnight. If most of your use is in the evening peak, a time-of-use tariff can cost more than a flat rate, because the peak rate is higher than a single flat rate.
What should I check before switching tariffs?
Check the exit fees on both tariffs, whether the new rate is fixed or variable and for how long, the total cost for your usage rather than the unit rate alone, the hours on any time-of-use tariff, and what tariff you will roll onto when the deal ends.
Sources
- Ofgem price cap, October–December 2026, announced 26 August 2026 — electricity 26.32p/kWh, standing charge 54.83p/day; gas 7.97p/kWh, standing charge 29.68p/day; typical dual-fuel household £1,723/year on direct debit; VAT on domestic electricity 0% from 1 October 2026 to 31 March 2027; next cap announced 25 November 2026. Reported 5 November 2026.
- US Energy Information Administration — US residential average electricity price 18.19 cents/kWh, January–July 2026; US average monthly bill $144, 2024, via NerdWallet.
Related: check your current numbers with how to read your energy bill, run them through the bill audit tool, and fold the result into your whole-home energy audit checklist.