Fixed vs. Flat vs. Variable – Energy Plans Compared

A common question we get from customers is What’s the difference between a Fixed Rate energy plan and a Variable Rate energy plan? Many alternative energy suppliers are now also offering a Flat rate (or Unlimited usage) energy plan. It’s important to understand the differences between these different types of energy plans. Understanding the differences will help you choose the right energy plan that is best for you and your family. Here are some key concepts to understand when choosing a Fixed, Flat, or Variable rate plan for your home electricity and natural gas services.

What is a Fixed Rate energy plan?

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 energy supplier. You can 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. This will give you certainty that your price will not change during the term of the agreement. However, if market prices fall, you may have to wait until your contract expires to get a lower price.

Fixed Rate – Natural Gas

A fixed price is an all-inclusive per Ccf/Mcf/Therms price that will remain the same for at least three billing cycles or the term of the contract, whichever is longer.

Let’s say you sign up for a 12-month Fixed Rate plan for natural gas at $0.6900 per ccf.
If you generally use around 100 ccf of natural gas per month, your estimated monthly bill for your natural gas supply would be an estimated $69.00 per month. A key thing to remember is that some months you will likely use less than 100 ccf of natural gas in your home. And in other months, you might use more than 100 ccf of natural gas. So, your total monthly bill on your natural gas supply could fluctuate depending on the month of the year. But with a Fixed Rate plan, the price per ccf ($0.6900) does not change during the entire term in months of the contract (12 months).

In other words, from the date that you enroll in a Fixed Rate plan, you get the same price per ccf ($0.6900) fixed for the entire duration of the contract term length (12 months).

Fixed Rate – Electricity

Electricity is priced a little bit differently than natural gas. For a Fixed Rate electricity plan, the example scenario above is similar, except that electricity is measured in kWh (kilowatt-hours). So, let’s say you sign up for a 12-month Fixed Rate plan for electricity at 8 cents per kWh. If you generally use around 1000 kWh of electricity per month, your estimated monthly bill for your electricity supply would be an estimated $80 per month.

In the same way as you might use natural gas, you might use less electricity some months, and more electricity in other months. Your total monthly bill for your electricity supply could change depending on how much electricity you use. But the rate per kWh still stays the same or “fixed” for the duration of your contract term (in this example, for 12 months).

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Unless you act prior to the expiration date in your contract, your rate may change to a monthly variable rate. You should read your contract’s disclosure statement for the terms and conditions to find out what happens after your term expires.

Here are some other things to remember about Fixed Rates:

– An all-inclusive per Ccf/Mcf/Therms price that will remain the same for at least three billing cycles or the term of the contract, whichever is longer. A fixed price will remain the same, usually for a set period of time. This will give you certainty that your price will not change during the term of the agreement.
– If market prices fall you may have to wait until your contract expires to get a lower price.
– The certainty of getting a fixed rate could cost you a little more money.
– Provides stability, especially when you’re budgeting your energy costs.
– Long-term fixed price contracts may have cancellation fees. Be sure to ask your supplier/read your contract for the terms and conditions.
– Extreme weather temperatures will not change your fixed rate. However, your energy usage may increase because of the extreme temperatures – creating an increase in your bill.

Learn more about our Fixed Price Peace of Mind plan here.

What is a “Flat” bill?

A newer type of energy plan that is becoming popular – is the Flat Bill (or unlimited usage) energy plan. A flat rate is defined as a fixed charge for goods and services that does not vary with changes in the amount used, volume consumed, or units purchased. This is an innovative approach to the traditional Fixed Rate energy plan. Instead of paying a fixed price per ccf for natural gas or per kWh for electricity, a Flat Bill plan simply sets a monthly charge. It’s similar to a monthly subscription charge that you might pay for digital streaming services like Netflix or Spotify. In the same way that you pay the same monthly fee no matter how many shows you watch, or songs you download, you pay the same flat bill amount each month no matter how much energy you use.

An Unlimited Usage Flat Bill plan is a locked-in monthly price that is not based on Ccf/Mcf/Therms usage. This gives energy consumers unlimited natural gas and electricity usage at one steady rate that cannot change during the contract’s term.

Learn more about our Unlimited Energy* plan here.

What is a Variable Rate energy plan?

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.

A variable price is an all-inclusive per Ccf/Mcf/Therms price that can change, by the hour, day, month, etc., according to the terms and conditions in the supplier’s disclosure statement.

If you select a variable rate, the rate may change with market conditions, so, if market prices increase, your rate may increase. If market prices drop, your rate may decrease.

Here are some other things to remember about Variable Rates:

– An all-inclusive per Ccf/Mcf/Therms price that can change, by the hour, day, month, etc., according to the terms and conditions in the supplier’s disclosure statement. If you select a variable rate, the rate may change with market conditions.
– If market prices increase, your rate may increase. If market prices drop, your rate may decrease.
– If you follow energy market prices and adjust your energy usage accordingly, you may save money.
– Changing rates may make it hard to predict your monthly bill and budget your expenses.
– Variable contracts often do not have an early cancellation fee, but check with your supplier. Make sure your read and understand your contract for the terms and conditions.
– During extreme hot or cold temperatures, wholesale energy prices may increase dramatically, which may increase your per Ccf/Mcf/Therms price. In addition, extreme temperatures may increase your energy usage which further increases your bill.

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.

NOTE: Cold and hot temperatures may increase the use of your heating units, which, in turn, will translate into higher energy bills whether you are on a fixed or variable rate.

About Santanna Energy

Santanna Energy offers a variety of electricity and natural gas solutions to eligible customers in Ohio, Illinois, Pennsylvania, Michigan, and Indiana.

Scroll down below and enter your service address to view energy plans available at your location. Or simply give us a call and one of our energy specialists will be happy to help!

Call: 630-491-6784