What is the difference between fixed-rate and differential tariffs?

When we talk about how to save money on your power bill, one of the first decisions to make is whether to choose a fixed-rate or differential offer. These are two very different types of offer: with the fixed rate, you pay the same price for the energy you consume at any time of day, while with the differential offer, the kWh price changes according to the time of day of consumption.

How does a fixed-rate power offer work?

A fixed-rate offer means a single energy component price at every hour of the day. Whether we switch on an appliance at 10 a.m. or at 10 p.m., we will pay the same price for the kWh consumed. The same also applies at weekends and on public holidays: we will always pay the same amount for each kWh consumed.

How does a differential power offer work?

Unlike a fixed-rate price, a differential offer includes two energy time bands. The first band (F1) is in force from 8 a.m. to 7 p.m. from Monday to Friday. On the other hand, the second time band (F23) is in force from 7 p.m. to 8 a.m. and all day on weekends and public holidays, and has a cheaper energy component price.

The differences between fixed-rate and differential offers

The convenience of the fixed-rate versus the differential band, or vice versa, therefore, depends on our needs and consumption habits. If we spend a large part of the day away from home and only switch on household appliances in the evening, choosing a differential power offer will give us a substantial financial advantage in our bills compared to a fixed-rate offer. By using electrical appliances when we come home in the evening, we will be using energy in the lower price range. Or we can decide whether or not to do most of our washing and housework at the weekend to save on the power bill.

The fixed-rate power offer, on the other hand, suits all those who also - or especially - need to consume energy during the day. In this case, we are free to use household appliances at any time of the day or night, paying a fixed energy component price throughout the day.

When choosing between a fixed-rate or differential offer, it is therefore a good idea to consider your typical day; this is the only way to make the right choice to save on your power bill. 

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