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Compare Energy Plans: Fixed-Rate vs. Variable-Rate

Posted on by Everything Energy 3 minutes, 2 seconds

When you compare energy plans in Texas, it’s important to know the key differences between two common types of electricity plans: fixed-rate and variable-rate. Each type of plan has its own set of advantages. Understanding them can help you make an informed decision about the best electricity plans for your needs and budget.

What is a fixed-rate electricity plan?

A fixed-rate electricity plan gives you a stable electricity rate for the length of your contract. Term lengths often range from 6-24 months with 12 months being a very common term length.  

Key features of fixed-rate energy plans

Rate Stability: No matter how the energy market fluctuates, your price per kWh remains constant for the contracted period (unless there are changes in Transmission and Distribution fees or other matters/fees beyond your retail electric providers control). This stability means more predictability and fewer surprises. You can budget better and not have to worry about sudden price increases.

Contract Length: To get the benefit of a predictable, fixed rate, you usually need to sign a contract for a specific period of time. This can be a positive if you prefer long-term stability. But it might not be as appealing if you want more flexibility or if you’re unsure about your long-term plans because fixed-rate energy plans sometimes have early cancellation fees if you want to switch providers before your contract has expired.

Price Comparison: Fixed-rate plans make it easier to compare energy plans and prices since the rate is steady. This helps you assess and choose the cheapest electricity plan for your lifestyle and needs over a set period of time.

What is a variable-rate electricity plan?

A variable-rate electricity plan is also known as a month-to-month plan. This type of plan gives you electricity rates that can vary from month to month without requiring a long-term commitment.

Key features of variable-rate energy plans

Flexibility: Compared to fixed-rate plans, variable-rate energy plans give you more flexibility. It’s easier to switch to another provider or plan. This is because there are usually no long-term contracts or cancellation fees. This can be a positive if you think there may be changes in your electricity usage or if you want to keep your options open.

Market Dependence: Variable-rate plans are directly influenced by market conditions. The rates can go up or down based on demand, fuel costs, weather, and other factors. Sometimes, this can result in lower rates than a fixed-rate plan offers.

Cost Variability: Variable rates mean less predictability in your monthly electricity bill because the rate can change every month. The fluctuating pricing structure also makes it more difficult to compare electricity rates. Plus, it can make budgeting trickier since you would need to monitor your electricity usage and market trends.

Which type of electricity plan gives me the lowest electricity rates?

As you have seen, both fixed-rate and variable-rate plans have their pros and cons. You can find low electricity rates with both types of plans, but don’t leave it up to luck. Compare energy plans and providers to see which will fit your home, lifestyle, budget, usage habits and preferences the best.

(And don’t forget to factor in any additional perks that may be offered with certain plans or providers.)

Compare energy plans to find the best electricity rates for you

Whether you’re looking for the rate stability of a fixed-rate plan or the flexibility of a variable-rate plan, Everything Energy has you covered.

Use our free search tools to view and compare energy plans from electricity companies in Texas you can trust. Filter by your average monthly usage, term length preference and more. Then, sign up when you find the perfect fit.

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