What is a tracker tariff?
How do tracker tariffs work?
Tracker tariffs can work in different ways. While some track wholesale prices every day, others offer discounts against the price cap.
Discounting against the price cap (quarterly) using unit rates
Some trackers that follow the price cap offer a fixed discount on unit rates versus the cap. The tariff's unit rates are discounted compared to the unit rates set by the price cap, which means that the savings per customer will differ depending on how much energy is used. Higher usage will mean higher savings, and vice versa.
The price cap changes every three months, so it can take longer for fluctuations to affect bills. This can be frustrating if prices are low because you don’t feel the benefit immediately.
Discounting against the price cap (quarterly) using standing charges
Other trackers offer discounts against the price cap using standing charges, so all customers who are signed up save the same amount because the standing charge is a fixed daily cost. These would be better for lower-consumption households than a tracker where the discount is on the unit rate.
Discounting against wholesale prices (daily)
Some tracker tariffs also work by tracking wholesale energy prices and setting the prices customers pay for their energy on a daily basis.
If prices are trending down, tracker tariffs provide quicker savings. However, if prices trend up, bills increase more quickly.
Additionally, tracker tariffs aren’t usually subject to the price cap, so customers can be charged more than the cap if prices rise beyond its limit. There is usually an inbuilt cap, but it could be as much as £1 per kWh of energy used.
Do tracker tariffs have exit fees?
Tracker tariff contract lengths are usually fixed but, while some tracker tariffs and therefore have exit fees, others don’t. If a tariff has an exit fee, you’ll have to pay it if you want to leave before the end of the contract.
Is a tracker tariff worth it?
A daily tracker tariff could be worth it if you're prepared to keep an eye on prices so you know how much you're spending on your energy. You always need to be aware that a rise in wholesale prices could mean you're spending more than you would on a fixed tariff or even a standard variable tariff.
If you're on a price-capped tracker tariff, you can always be sure you're paying less than the price cap, but you could potentially be saving more on a fixed deal.
Is the Octopus Tracker tariff worth it?
In general, it’s difficult to say whether it’s the right move to sign up to a tracker tariff because prices are so unpredictable and savings can’t be guaranteed. If you particularly want to join Octopus, the tracker tariff could be worthwhile but it depends on whether you're prepared to:
- Keep up with energy wholesale prices on a daily basis
- Potentially be charged more than you would if you were on a price-capped tariff.
How do I sign up to a tracker tariff?
It’s always worth running an energy comparison to see whether a tracker tariff could be right for you. The process only takes a few minutes and could result in significant savings on your energy bill. Get started below.
Run an energy comparison
Click here to compare energy prices and get started on your energy switch.
