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Choosing Your Electricity Plan: Fixed Rate or Variable Rate?

If you live in an electric market that’s been set free by deregulation, you’ll be able to shop around for residential electricity from a retail electric supplier. When you do, you’ll probably be confronted with two main types of plans: fixed-rate plans and variable rate plans. Sometimes the information about which type of plan is best can be a little confusing, but thankfully the differences between both types of plans can be easily explained.

Fixed Rate Residential Electricity Plans

Fixed-rate plans lock you into one rate for the length of your contract and will charge you the same amount per kilowatt-hour of electricity each month until your contract expires, whether the price of electricity rises or falls.

If you’re like a lot of people and think electric rates are only going to go up, then being able to sign a contract and lock in your rate for up to two years, depending on what your electric supplier offers, might be a smart move. After all, if electric prices go up, you’ll be protected from any rate increases until your contract expires.

The Mixed Benefits of Fixed Rate Plans: You won’t have to pay for increases if electricity prices go up. If electric rates go down, however, you’ll be stuck paying your contract’s higher rate.

Variable Rate Residential Electricity Plans

Variable rate plans allow your electric rate to change from month to month, based on fluctuations in the market. Because the electricity market is pretty volatile, signing up for a variable rate means you’re probably destined to pay a different amount per kilowatt hour every month.

If you think electricity prices might fall, or at least fluctuate enough on the low side to come out cheaper on average than a comparable fixed-rate plan, then a variable-rate plan might be best for you. With a variable-rate plan, you could end up being surprised — either in a good way or a bad way — when you get your monthly bill.

The Mixed Benefits of Variable Rate Plans: If electric rates go down, so does the amount you pay for electricity. If electric rates go up, however, you’ll have to pay more.

Sources:

Electricity Texas website, “Benefits of Fixed Rate Electricity Plans.”

Switch Energy Pennsylvania website, “Fixed Rate vs. Variable Rate Made Easy.”

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*Certain Terms and Conditions apply. This offer is available to first-time customers only. Customers must sign up for a fixed-rate energy plan. The plan may include a monthly service fee depending on the product. Use promo code which is showing above to qualify. Rate expires at the end of the term. Canceling or changing supply service prior to the end of the fixed-rate term may subject the customer to an early termination fee based on the product details. To be eligible to receive Spark Energy rewards, customers must enroll in a fixed term plan and maintain an active Spark Energy account in good standing (no past-due balance owed) for 45 days after the beginning of service. May not be redeemed for cash. This offer is subject to change or cancellation without notice prior to customer acceptance. This offer is nontransferable and cannot be combined with any other offers. This offer applies to services areas where Spark Energy LLC is active. The offer expires on 12/31/2020. See the Terms of Service and Electricity Facts Label (applicable only for TX) at www. SparkEnergy.com for more details.
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