Glacial Energy Blog

What’s the Difference: Fixed or Variable Rate Plans

The commercial and residential electricity market is full of choices that can save consumers money, time and hassle. The key to understanding these choices begins with understanding the basic rate plans that are offered by most electric companies: fixed rate plans and variable rate plans.

Fixed Rate Plans
A Fixed Rate Plan is a rate per usage (measured in kilowatt hours) that remains the same over the length of a contract. No matter what happens with the cost of energy, the amount you pay per kilowatt hour of electricity used will remain the same.

Benefits of Fixed Rate Plans:

With a fixed rate plan your electric bill will only go up or down according to your usage, something you control, not because of the cost of electricity, something you do not control. By selecting a fixed rate plan you will also save time by eliminating the need for researching ever-changing electricity rates, at least during the term of your contract.

Disadvantages of Fixed Rate Plans:
If electric rates decline and you are still under your current contract, you may end up paying more per kilowatt hour than other consumers.

If you worry that electric rates are only going to increase over time, a fixed rate plan protects you from price increases during the term of your contract. However, on the other hand, if electric rates decline, you will keep paying your higher, fixed rate until the contract expires.

Variable Rate Plans
A Variable Rate Plan usually has a low introductory price for a set, short period of time (such as 1 to 3 months). After the introductory price ends, your energy supplier is free to set the price at whatever rate they choose. The electricity market can be rather volatile, meaning that you may pay a different amount per kilowatt hour every month.

Benefits of Variable Rate Plans:

If you want immediate savings when energy prices decline, can afford to pay more if they rise or prefer the freedom to change plans anytime, a variable rate plan offers the best option for you.

Disadvantages of Variable Rate Plans:

If rates increase, so will the rate you pay. Although a variable rate plan offers more flexibility, you will need to spend time researching the market and comparing suppliers. Be sure to check your rate after the introductory period ends to be sure that you are getting the savings you expected. You can call your supplier’s customer service number any time to check your rate.

If you are someone that is always looking for the best deal, you keep up to date on how much you pay for electricity, and have the time to shop, a variable rate plan provides flexibility to move with the market and get the best price currently available. With a variable rate plan you must start with the assumption that electric rates will stay the same or go lower. (If you think rates may increase, think about selecting a fixed rate plan to avoid facing higher rates)

Deciding between a fixed rate plan and a variable rate plan for your commercial or residential electric needs is a personal decision. By knowing the differences in rate plans you can become a savvier consumer, and can save you more than just a few dollars.

About Glacial Energy- Glacial Energy is one of the fastest growing national retail energy suppliers selling electricity and natural gas to residential, commercial, industrial, and institutional customers in deregulated markets across the country. Glacial Energy has the resources and market knowledge to provide customized quotes for your business or cost saving opportunities for your home. Learn more about Glacial Energy by visiting www.GlacialEnergy.com

 

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