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

February 1, 2010 § 2 Comments

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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