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My energy supplier offers two tariffs:

The first is a "Price Protection tariff". It gives you a fixed per-kWh price for 12 months, and has no exit fees (23.28 cent)

The other is a "Variable price tariff". It has a higher per-kWh price (25.31 cent).

This appears to be the only difference.

I am a little thrown regarding the economics here.

  • Does this mean the company is assuming the price will likely go down?
  • If they believed the price will likely go up, should I not have to pay a premium for the price being fixed.
  • Otherwise, what would be a reason for a customer to choose the variable price tariff?
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It is possible that the supplier is trying to segment the market:

  • For those customers who do not frequently review the pricing options, it has a "standard variable tariff" which is not the lowest price on the market

  • For those customers of theirs or of other suppliers who do review the options, it has a lower price option which it sets competitively, though it hopes that some of these will not review at the end of the 12 month period and will then be automatically switched to the higher price "standard variable tariff"

Whether you regard this as promoting competition or as an abuse in competitive markets is a complicated political and regulatory question

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