Tracker Tariff Explained
What is a tracker tariff?
As the name suggests, a tracker tariff tracks a price of wholesale energy. This means you won’t have a fixed unit price for your energy but rather the cost of your energy can rise or fall by roughly the same amount as the wholesale market.
Our Tracker Energy Tariffs Explained
Whether you’re new to energy tracker tariffs or you’re looking for convenient, low-cost wholesale energy market prices, our Flexi Online (Index Tracker) package is for you. This package aims to replicate or track wholesale electricity and gas prices.
This is in contrast to our fixed tariffs which charge you the same amount for your unit price during the year, allowing you to budget for each month and protecting you from price rises. Equally, this doesn’t take advantage of falling wholesale prices.
Important information – The wholesale electricity and gas price can fall as well as rise, so you could pay more or less for your energy each month. If you are at all unsure of the suitability of the Flexi Online (Index Tracker) package for your circumstances, please contact us by email or call us on 03455 57 78 78.
Wholesale Price Index
We don’t expect you to look at the price of gas and electricity every day, that’s our job after all, and we don’t expect you to just take our word for it either. That’s why we use independent price data provided by theice.com, a recognised body within the energy industry.
How we calculate changes to your price
When launching our new tariffs, we calculate the average price for the first full month ahead, i.e. for a tariff launched in January, we assess the average price for the month of February. At the end of each month we will assess the average price of the month ahead and compare it with the average price from the previous month.
We will then calculate the difference in pence per kWh and your energy price will change (up or down) by that value on the 15th of the following month. All other elements of your tariff are fixed for the duration of your contract.
Below is a worked example for a tariff launched in January:
- Launch prices will be calculated on average forward prices for February.
- 1st week of March – we’ll calculate new prices based on the difference between January’s launch prices and on average March prices throughout the trading month of February.
- 15th March – new prices come into effect.
- 1st week of April – review based on April prices throughout the trading month of March.
- 15th April – new prices come into effect.
How will payments work?
We try and make things as simple as possible and, where we can, try to avoid adjusting your direct debit too much to make things easier for you to manage. We will let you know in advance if your payments need to change.
We will periodically review your Direct Debit amount to ensure it is keeping track with your usage and the latest view of prices. Please remember that prices are likely to be higher in the winter, as will your consumption, and therefore any credit built up in the summer may be required to cover the winter period. Of course, reductions to Direct Debits can be made.
What about volatility?
We understand volatility can be a concern when looking into tracker tariffs, however, we have thought about the impact of this on our customers and have come up with a way to minimise the risk of potential price spikes.
This means you will be tracking the wholesale energy price but have some protection from short-term price volatility. Remember, because of the seasonal nature of prices, it is likely your price will be higher in the winter and lower in the summer.
Please bear in mind that it may not always be possible to fully mitigate the impact of price spikes given the volatility of wholesale prices.
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If you’re looking for great priced gas and electric tariffs, get a quote with Utility Point today. Not only do we offer highly competitive energy prices, but we also reward our members for choosing us with a range of exciting (and useful) benefits.