Know the Differences Between Fixed Rate and Variable Electricity Plans

When you are looking for a new electrical provider, you might want to check if they offer a fixed or a variable electricity plan. If you live in a deregulated energy market, both plans will be available to you. Your choice between the two will be the key in determining how much money you spend on your electrical bill each month. To figure out which one is right for you, it is a good idea to familiarize yourself with the features of each plan.

The Variable Electricity Plan

With a variable electricity plan, the amount you are paying for your electric service will fluctuate according to the market. This means your rate can change monthly, weekly and even hourly. It is typical for your rate to spike when it is extremely hot or cold and electricity is most in demand.

Variable electricity plan has advantages and disadvantages. While it can save you money in the long run, there is an element of uncertainty in monthly spending, and it may be difficult for some households to figure out a budget when it comes to the amount they need to set aside for electricity costs. One benefit of it is that it rarely comes with an early cancellation fee, although customers should check with their providers to make sure this is the case.

Fixed Rate Electricity Plan

If you are on a fixed rate electricity plan, it means your provider will not change the amount you pay per kWh for three billing cycles or the length of the contract, whichever one is longer. Unlike the variable electricity plan, with the fixed rate, you can easily budget the amount you are spending on your electric bill each month. However, with this plan, there also may be times when the market goes down and you end up paying more for your electricity consumption than its actual worth.

Fixed rate plan may vary in terms as far as length of contract and the consequences of early cancellation. Those interested in signing up for a fixed rate electricity plan will want to make sure they read the fine print before signing any contract.

Which is the Best Contract for Me?

There is really no good answer to this question as a variable rate electricity plan might be more suited for some while a fixed rate might work better for others. The amount of savings usually evens out no matter what plan you are choosing, but for some ,it may be a choice between long term and short-term savings. Fixed rate plan offers stability, reliability and minimized risk while variable rate offers freedom and flexibility. Customers may also want to review the contract terms offered with each plan as part of their decision-making process. Households should consider their financial situations, budgeting needs and future plans in order to determine which option is right for them.

*Fixed rate and variable electricity plans are available only in states that offer deregulated energy markets. These include Texas, Pennsylvania, Ohio, Illinois, New Jersey and Maine. Feel free to browse internet resources for a full list of states with deregulated energy markets.

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Sirikit is a professional blogger and project manager with over 6 years of experience. Currently, she’s handling http://usesi.com/

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