Fixed Rates vs Variable Rates: The Difference Between Electricity Plans

Living in a deregulated electricity market means you get to shop for an energy provider who will save you money on your monthly electric bill. As you shop around you’ll see lots of different types of offers. These will use the words “fixed rate” and “variable rate” when referring to the plan. Knowing the difference will help you make a better, more informed choice.

Defining Variable Rate Electricity Plans

When you choose a variable rate plan, the price you pay will fluctuate each month or hour as the market fluctuates. This means that your rates can go up, which means you’ll pay more money, especially if you live in an area, like Texas, that experiences extreme heat. You’ll find times during the year when you’ll pay dramatically more per kWh for your electricity as witnessed by a spike in your bill. Sometimes you can still save over the long-term with these rates, but their uncertainty makes budgeting difficult. However, one of the nice benefits is that there are no early cancellation fees with most electricity providers.

Defining Fixed Rate Electricity Plans

Fixed rate plans are different from variable rate plans, because the price you pay per kWh doesn’t change for the term of your contract. This means you’ll always know how much to budget for your electric bill each month. While this sounds beneficial, you need to know that there will be times when you’re paying more than the market value for your electric usage, because the market price has gone down. Obviously, different fixed rate plans have different terms and conditions. This is why you need to make sure you read the contract thoroughly before signing it.

Fixed Rates vs Variable Rates: The Difference Between Electricity Plans

Deciding What’s Best – Variable or Fixed Rate Electric Plans

Clearly, both variable and fixed rate electric plans offer its own unique benefits. Deciding what type of plan is best for your needs, requires you to look at the contract and the deal you’re being offered. Pay special attention to the rates, price, length of the contract, terms, conditions, extra fees, and what happens if you need to cancel the contract early. Understanding all these things makes you a well-educated customer who can select the best electricity plan.

We will be happy to hear your thoughts

Leave a reply

Texas Electricity Examiner
Login/Register access is temporary disabled