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Variable Vs. Fixed-Rate Energy Plans

Written By: Warm Thoughts Communications on June 3, 2021

Learning The Pros And Cons

energy pricing options new jersey

When it comes to choosing an energy plan, you have a lot of options to pick from—and one of the biggest choices you’ll have to make is whether you want to commit to a variable-rate or fixed-rate plan.

Before you figure that out, do you know what each of these terms means? Which will help you save more money on your electricity or natural gas bill?

The truth is that each of these options has its inherent benefits—and costs—that may determine which is right for you. It pays to spend a few minutes getting to know what each type of plan offers. Let’s take a look:

What Is A Fixed-Rate Energy Plan?

With a fixed-rate energy plan, the price you pay per kilowatt-hour (kWh) (or therm) stays the same throughout the course of your contract, regardless of what the market price for electricity or natural gas does.

Keep in mind that this doesn’t mean that energy bill will always be the same. Only your rate will remain unchanged. Your monthly bill will depend on how much energy you use, plus any fees tacked on by the utility.

Pros of a fixed-rate energy plan

Cons of a fixed-rate energy plan

What Is A Variable-Rate Energy Plan?

With a variable-rate plan your kWh (or therm) rate can change depending on the market price for electricity or natural gas, or other factors as determined by your energy supplier. Since the market price for electricity and natural gas can be volatile, it can make your bill paying slightly unpredictable.

However, choosing a variable rate plan can work to your advantage when market prices drop. But in periods of high electrical demand (during the summer in the Northeastern United States, for example) a variable-rate plan could get quite costly. The same is true for natural gas in winter months when home heating is in high demand.

The terms of variable-rate energy plans can also be complicated. Some combine fixed and variable rates, using the former during periods of low demand and the latter for periods of high demand. Therefore it’s critical to read the fine print before choosing an energy plan.

Pros of a variable-rate energy plan

Cons of a variable-rate energy plan

Which Plan Is Better?

When it comes to choosing between fixed and variable plans, there is no one-size-fits-all solution. The answer about what is better for you depends on how your family uses energy and your own tolerance for risk.

The biggest difference between variable-rate vs. fixed-rate plans is certainty. Fixed rates mean more predictable monthly bills. Variable plans, while less predictable, could save you money. But they could cost you money too.

Taking some time to understand the meaning of fixed vs. variable energy rates can make you more confident about which plan better suits your needs. This is important information to know when you compare various plans for several energy providers in your area! Just remember that whichever plan you choose, it’s important that you read your contract carefully before you commit!

Need help choosing an energy plan for your home? Give us a call at 877-259-7693 today! We’ll walk you through your options so you can make a choice you can live with—whether you’re looking for a provider of electricity, natural gas, or both!

Contact us today to learn more—or get the enrollment process started right here on our website!

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