Fixed Energy Rates vs. Variable Energy Rates

With more energy deregulation policies in most states, homeowners now have more choice than ever in choosing a supplier to purchase their gas and/or electricity from. In addition to choosing a natural gas and/or electricity provider, homeowners also have a choice in the type of energy rate plan – fixed energy rates or variable energy rates. Knowing the differences of the different rate plans and what they offer will help you choose the right energy plan that is best for you and your family.

What are variable energy rates?

Variable energy rates are the current market prices that energy providers choose to charge. They are determined by current market conditions and can also fluctuate based on the market conditions such as global demand, production, inflation, and weather conditions. This means that if market conditions cause prices to increase, your energy rate will increase as well. If you choose a variable rate plan, there are no contract terms and you can cancel your service any time with no penalties or fees.

What are fixed energy rates?

Fixed energy rates are not subject to changes in supply and demand, inflation etc. Fixed energy rates will remain the same for the duration of the contract with the supplier. You are able to lock in a low energy rate for a set period of time and avoid any upswings in the market price of electricity and natural gas products.

What are the differences?

Variable rates offer customers flexibility. There is no contract needed to sign up and you can cancel your service at any time with no penalty or cancellation fees. However, the inherent instability in the energy market means that your energy rates can increase as energy prices increase.
Fixed rates on the other hand will lock in your energy rates for the length of your contract with your supplier, allowing security and stability regardless of any fluctuations in market prices. Your energy rates will not change. With fixed rate there is sometimes a penalty or cancellation fee if you terminate your service before the end of your contract term. It is important to know the terms of your contract to prevent cancellation or penalty charges.

What to Choose

There is no way to know which way energy prices will go, so it is important to measure the advantages and disadvantages of all energy rate plans so that you can select the best plan to save you and your family money.