Fixed Vs. Variable Rates Made Easy

A fixed electricity rate will generally remain the same throughout the term of a contract (with minor exceptions). A variable electricity rate can go up or down each month according to the current market price.

If you choose a plan with a long contract period and a fixed rate, you can be assured that your price will not change during that time. But, if market prices fall you may have to wait until your contract expires to enjoy a lower price. Variable rate plans can provide the benefit of lower prices but will also rise if natural gas and electricity prices spike due to natural disasters, cold winters, or market conditions. Make sure you understand how and under what conditions your rate can change when selecting a plan, and pick the one that’s right for you.

The bottom line is that consumers with a variable rate plan could reap the greatest savings, they could end up paying the highest bills, or they could wind up somewhere in between. The negative part of being fixed is that if the price lowers, you don’t get that lower price because you already agreed to purchase energy at your original price. If you want out because prices have dropped, you will most likely be charged a cancellation fee.

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