We already talked about how your state’s legislation gives you the power to choose the supply portion of your energy bill, right? Well, we are here to help you understand what fixed rate vs variable rate is. All so you can make an informed decision.

If you live in a state with deregulated electricity market & you haven’t switched energy suppliers in the past few years, or, if you haven’t switched at all. You’re probably listed on a basic variable rate that comes by default with your utility company. How can you check this? Your electricity bill is the key.

People tend to think that, between fixed rate vs variable rate, the last ones tend to be more expensive in a long term. Truth is, this is a fact most of the time but not for this should be ruled out. We will demystify the most basic questions about both, fixed rate vs variable rate. You’ll find all the tools to choose what’s best for your specific case. So, you can decide whether fixing your rate this year is a great or a terrible idea.

Fixed rate vs variable rate & deregulation

When you’re making your Energy Choice, deciding whether or not to change a different plan than the one you already have is one of the most important choices. The costs you will face by the end of the month can vary greatly. Especially depending on the usage, you have of the electricity & the rate. If you want to know what’s best for you between a fixed rate vs variable rate keep reading.

fixed rate vs Variable Rate
Photo by Karolina Grabowska from Pexels

Variable-rate plans

If you have a bundled rate, meaning the electric supply & the delivery of it is provided by your utility company you’re most likely in a variable rate plan. But what does this mean for you?

In a nutshell, it is a plan where the kWh pricing for your plan may change due to peak seasons, seasonality, or day periods. These plans are usually ruled by demand response & time variations. Meaning when there is a higher demand for it there will usually be a higher cost per kWh. You will get a per-kWh price that changes by the hour, day, month, season, etc.

The price fluctuates as the wholesale cost of the commodity changes periodically. This can be affected even more by heatwaves or extremely cold weather conditions when demand is Usually on these conditions consumers are at home looking to escape from it.

So what are the perks of variable rates?

Adjusted usage on off-peak hours can mean good savings.

Do you remember when your mom was doing the laundry at late times at night? Well, she was more likely taking advantage of the off-peak times to run those appliances that consume striking amounts of electricity. Follow market prices & adjust your usage to on-peak vs off-peak hours. You can decrease your monthly bill because the kWh rate is cheaper at that time.

No commitment needed

Another key factor between fixed rate vs variable rate is commitment. If you’re a person who doesn’t like commitment (short/medium/long term) these rates are for you. Since these plans operate monthly, you most likely will not have a contract term, termination fees, etc. Be aware that this is not all rainbows and flowers. In the long term, variable rates can make it difficult to budget your expenses and forecast your monthly cost.

Be aware to check your contract as they may sometimes include a term here and there

Fixed rates

When comparing fixed rate vs variable rate the biggest difference is that on this rate, you decide. You’re entitled to choose one per-kWh cost & to get it fixed throughout the length of your contract. No need to deal with different monthly rates and seasonality. Knowing exactly how much you pay per kWh will give you complete control over your monthly payment.

But what’s in it for you?

Certainty & budget control

Between a fixed rate vs variable rate, with the first one you can rest assured that no matter what happens in the market (extreme temperatures, oil prices, etc), the price you pay for electricity will remain the same. This can help you control your budget as there would be no difference in the rate you’ll pay throughout your contract. However, in the unlikely case of a fall in the market price, you can end up paying more than the average for energy.  

Just remember a fixed rate doesn’t equal a flat rate. In a fixed-rate plan, the kilowatt-hour rate is still in place. As a result, the amount of energy you use will determine your monthly payment. We have prepared a blog to help you lower your monthly costs in a fixed-rate plan.

Energy all-day-long

There’s no need to stay up all night waiting for the laundry to finish its washing cycle. With a fixed rate you lock your price regardless of the hour, day, month, or season.

Competitive prices and great savings

Market competition is not only about finding a fixed rate vs variable rate. It opens itself to new actors. This usually means new suppliers looking for ways to get your attention & therefore giving you lower energy rates. Give it a try. Shop around in our marketplace, with a quick form we will gather all market quotes giving you an affordable offer that’s great for you and that matches your needs.

3 key factors to consider before deciding between fixed rate vs variable rate

How long do you want to stick to your rate?

One defining factor when defining fixed rate vs variable rate is the term. Usually, the longer the term of the contract the cheapest the rate. If you want to stick to a rate that’s affordable for a long time, having the peace of mind that it’ll remain the same regardless of market conditions then a fixed rate is great for you.

Is the source of that electricity an important factor to you?

When you choose your energy supplier you have the option to decide the source of that energy. You can choose from green renewable sources such as wind, solar plants; or from non-renewable sources such as coal, natural gas, or oil.

Do you understand your electricity bill?

You would be surprised but more than 60% of US energy consumers don’t know how to read their electricity bill. When you choose fixed rate vs variable rate plans you must understand what your costs are, the difference between the supply costs and the delivery costs, etc. This will make it easier for you to understand your needs and your current consumption stats.

Ps. Don’t worry we have a full article explaining your electricity bill in case you’re part of that 60%.

Whatever may be your choice between fixed rate vs variable rate, you can have peace of mind knowing that your energy delivery wouldn’t be affected by your choice, as your local utility will remain the same. In case of a power outage, or any problem, it will be the one who will solve any issues you may have. Do you want to learn more? This extensive explanation from the US Office of Energy Efficiency & Renewable Energy can give you more light on what to evaluate when you choose your utility rate.

You can also check out our website, enter your zip code, and some basic information about your consumption. You will find out if there’s a rate that may benefit you more than your current one. At Power Choice Now, finding a new energy supplier is straightforward. As a client, you benefit from competitive energy markets, by this, we mean you may choose the energy supplier that best suits your needs.