Fixed vs Variable Rates: What’s on YOUR Electricity Bill?

When customers sign up on and decide to switch to another electricity supplier, they will have the option of choosing a contract with a fixed rate or a variable rate. With a fixed rate, the monthly bill is the same for the duration of the contract. With a variable rate, however, the monthly bill will change depending on usage and market rates for electricity.

So which one should you choose? Well that depends…

Fixed rate contracts do allow for a level of predictability which is useful for managing monthly costs. However, variable rate contracts allow customers to immediately see the benefits of a decrease in market rates for electricity, a benefit which is not immediately available to customers who choose fixed rate contracts. Now on the other hand, the monthly bill under a variable rate contract may increase if the market rates increase, a risk that is readily mitigated by the fixed rate contract.

A few suppliers even offer blended contracts that allow customers to have their monthly bills determined by both fixed and market rates. So, for example, 40% of a customer’s bill may be based on a fixed rate while the remaining 60% is based on the market rate.

As is the case with these things, the power is yours. Know your options.

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  1. Laurie says:

    By your definition, a “fixed rate” doesn’t take into consideration usage; only the variable rate does. I find that hard to believe. Doesn’t the “fixed” v. “variable” ONLY refer to the market rate for electricity?

    1. power2switch says:

      Thanks for the comment Laurie, the definition assumes that with the fixed and variable rates you have an idea of what your usage is (and is the same in either rate type. The variability in price (for variable rates) will make it hard for the customer to ‘predict’ what the monthly bill will be. There is more ‘predictability’ with the fixed rate. Hope this clarifies? Feel free to reach out should you have any other comments/questions. Thanks!