If you’re new to the world of deregulated energy, you might be overwhelmed with the numerous different providers, rate types, programs, rewards, and so on. One of the most significant changes in how you see electricity is the chance to move to a fixed-rate electricity plan over a variable electricity rate (or time-of-use, demand, etc.). In this blog, we’ll go through the differences over both and why you should switch to a fixed-rate electricity plan or the one that is more cost-effective for you.
So let’s dive in.
What is a fixed-rate electricity plan?
Source: Photo by bruce mars on Unsplash
To begin with, you should know that the measuring unit of electricity is kWh. They’re referred to the amount of energy you consume per hour. Or the price for the kWh that you use times the period of usage. Usually, there are two types of electricity rates, fixed ones and variable rates. In this article, we’ll focus on a fixed-rate electricity plan.
If you’re on a fixed-rate electricity plan, you will see that prices are steady and that your monthly bill only reflects your consumption, not the differences in the demand. And friends, this is our first reason to switch to it.
1. Let your energy bill reflect your consumption and not the changes in energy demand
To explain the difference between consumption and demand, take a look at this short video:
As you can see, when you use electricity can be just as important as how much you use. If you’re on a variable rate, your electricity costs will be linked to two factors, how much energy was used and the electricity demand at those times. To explain this, let’s look at this example: the maximum load at any point of time is referred to as the demand – this is directly linked to how hard the grid has to work to meet your needs.
When the demand is higher, utility companies tend to charge higher rates because it’s harder to meet that demand without overcharging the electric power grid. So, for example, if you light up a lightbulb (of 1 kW) for 10 hours, vs. 1 hour of 10 lightbulbs lit up simultaneously, you’ll see that the demand is higher in the second scenario, even though the consumption is the same. Therefore, your energy company needs a higher ser of equipment to provide that 10 kWh at once, than separated in 10 hours.
Managing demand can be a great solution to lower energy bills; however, it implies significant switches in your energy consumption habits. If you want to just skip all of this, you can stick to a fixed-rate electricity plan. A fixed-rate electricity plan offers you the stability of knowing that, regardless of what happens with the demand, you’ll keep paying the same for a set period.
2. Be able to budget around your monthly energy bills
For many people, the most accessible type of contract is a fixed-rate electricity rate; why? Because it allows them to rest at ease, knowing that the rate will remain the same, regardless of what’s happening in the world. Let’s put it simply, the only factor that affects your bill with a fixed-rate electricity plan is how much electricity you consume.
That’s the reason why it makes it easier to track and regulate your use and control your budget. You can compare your bills over a year or the term of your contract to see when your individual demand for power is most significant. If you use the most power at peak periods, when electricity is often more costly, a fixed-rate electricity plan may save you money and headaches
3. Protect yourself from price spikes
With a fixed-rate power plan, you can protect yourself from price spikes in the electrical market that might occur during periods of increased demand, such as harsh weather months – winter or summer. Because of the extreme temperatures, air conditioners and furnaces across the country will have to work harder to keep houses cool/warm. Many people will choose to stay at home, boosting energy usage and demand from the power system.
Linked to this, you will find more and more people switching to a fixed-rate electricity plan before winter and summer. As prices tend to be slightly cheaper than on peak seasons.
4. Choose the kind of energy that works best for you
Another great benefit of a fixed-rate electricity plan is that you can now choose your energy source. Or how your energy is made. With the market opening to new competitors, you’ll see more and more options of energy sources that are great for you and the environment. You can choose the one that works best for you, from fully renewable energy to all kinds of energy sources.
Saving money isn’t the only incentive to make a move. A rising number of providers offer ‘green tariffs,’ which indicates that the provider is taking steps to aid the environment. However, providers’ definitions of ‘green’ differ. Some may claim to equal your power use by returning the equivalent in renewable energy to the grid.
Others claim to balance your energy use, often by planting enough trees to absorb the quantity of gas you use. Specific provide ’renewable energy,’ however, in some cases, this is restricted to 15%, implying that the remainder is derived from non-renewable sources such as a gas or coal-fired power station.
5. Switching can’t be easier
Source: Photo by SHVETS production from Pexels
It is simple to switch to a fixed-rate electricity plan. You can start by using an energy comparison website for a few minutes. You can speed up the process by having all of the necessary information on hand, such as the name of your current supplier and the current rate type, as well as your energy use, which can generally be found on your bill or online account.
The site will also question how you presently pay your bill and want to pay with a new supplier and your zip code, and a current meter reading. According to the energy regulator’s standards, the changeover should take no more than 15 working days, and your new supplier will do all of the paperwork.
At Power Choice Now we do this research for you; you can simply give us a call and find the best fixed-rate electricity plan for you and your needs.