What is the Difference Between Variable and Fixed Electricity Plans?
Know the differences between variable and fixed electricity plans so you can efficiently weigh which will be more beneficial to you.
Living in a deregulated energy market means you can freely choose whichever energy company you like. You can also go for the kind of pricing that suits your needs and preferences. Two of the most common electricity pricing plans are variable rate and flexible rate plans. Determining the right type of electricity plan for your home or business shouldn’t be a daunting or confusing task. Learn their differences below to help you make an informed decision.
Variable vs. Fixed Electricity Plans
Variable Electricity Plan
As the term denotes, variable electricity rates may vary from month to month depending on the market conditions. And because the energy market is quite unpredictable, your kWh (kilowatt per hour) costs can increase or decrease monthly and even hourly. Dynamics that affect variable energy costs include weather conditions, temperature, fuel costs, supply and demand, etc.
Many consumers pick variable rate electricity plan for they’re able to save more money in the long run. But others dislike the uncertainty it brings, making it hard to set and stick to their monthly budget. People also prefer this plan because it doesn’t normally have an early termination penalty fee.
Fixed Electricity Plan
A fixed rate electricity plan is simply that—a permanent price for your electricity costs per kWh. Your kWh practically stays the same for at least three months or the whole duration of your contract. The major advantage of fixed electricity plans is price stability. You could have peace of mind knowing exactly how your monthly expenses would look like and could plan for it.
You also won’t be affected by erratic market conditions. This translates to not paying a higher electricity bill should energy prices soar. However, if they drop, you’d be locked paying your contract’s pricier rate. A fixed rate electric plan also usually requires long-term contracts and comes with an expensive early cancellation cost.