Fixed Electricity Rates, Are They Worth It? [Pros & Cons]

Before signing up for an energy plan, you’ll need to ensure that the one you picked suits your electricity usage pattern and budget. With different electricity plans to choose from, selecting the one that works for you can be challenging. 

Fixed-rate electricity is the more popular choice among power consumers owing to its many benefits. However, it will still be in your best interest to know more about other available plans and ascertain if a fixed-rate energy plan is indeed the best option. 

Let’s dig into the details of what fixed-rate electricity plans are. 

What is a Fixed-Rate Energy Plan?

With fixed-rate electricity plans, you pay a specified price per kilowatt hour every month throughout your contract’s term. That means even if energy prices in the market change, your electricity rate won’t be affected. When you enroll in a fixed-rate plan, you can easily estimate your energy costs without having to monitor if electricity market prices drop or surge. 

Fixed-rate electricity plans are the more popular energy plans because they’re more beneficial. Still, the plan type also has some drawbacks.  We’ll examine both the pros and cons to help you decide which is the better plan type for you.

Benefits of Fixed Rate Electricity

You can expect to enjoy some perks when you opt for a fixed-rate plan. Some of these perks are the following. 

Predictable electricity bill

You don’t have to keep checking market prices to determine how much you’ll pay per kilowatt hour with fixed-rate electricity. That’s because, with fixed-price electricity plans, your rate stays the same no matter how much the prices fluctuate in the energy market. As such, you won’t have to worry about price surges during the summer and winter months. Moreover, knowing your expected monthly bill also lets you budget around your electricity costs. 

The chance to get the cheapest power rates

If you sign up for a fixed-rate electricity plan when the per kilowatt-hour rates are low, you’ll get charged with that rate for the duration of your contract. This means timing is essential. If you’re serious about saving on your electricity costs, you can switch energy providers when power rates are on a downward trend. 

Get loyalty rewards

The deregulation of the electricity market allowed the entry of numerous power companies into the industry. Due to stiff competition, each energy provider seeks to entice customers using various promotional incentives. Many of these providers reward loyal customers, some with free electricity, others with gift cards, or other freebies. 

Drawbacks of Fixed Rate Electricity 

In analyzing which electricity plan type to choose, you’ll also need to consider the disadvantages each plan has. Let’s now check the downsides of choosing a fixed rate plan. 

No savings from lower prices in the market

Fixed-rate electricity plans lock in your per kWh rate until your contract expires. That means you won’t enjoy any savings on your utility costs because you’ll pay the same rate even if electricity prices in the market drop. 

Possible charges for early cancellation

Your utility company may charge early cancellation fees if you switch away before your contract ends. Take note that some electric companies impose hefty fees for breaking your contract.  

Can’t easily switch away from your power provider

Fixed-rate plans won’t let you switch easily to another electricity provider. You’ll have to wait for your contract to end or pay an early cancellation fee. So if you’re not satisfied with the service of your current power company, you either grin and bear it or pay a fee to switch to a new one.

Fixed-Rate Energy Rates

Before you shop for a fixed-rate electricity plan, we recommend that you first determine your energy usage. This will let you compare how much you’re currently paying against what you’ll need to shell out per month with a new fixed-rate plan.  

Here are some of the best Texas electricity companies and the fixed-rate electricity plans they offer. Check which one will help you save money on your monthly bill. 

What is a Variable-Rate Energy Plan?

This plan type is a direct contrast to a fixed-rate electricity plan. While you pay a specified rate with a fixed-rate energy plan, the per kWh price of your electricity fluctuates from one month to the next with a variable-rate plan.  

Market prices dictate the electricity rates in a variable-rate plan, so if the per kWh price of electricity surges, so will your energy costs. That’s one reason why many consumers opt for fixed-rate electricity plans.  

Like fixed-rate plans, variable-rate plans come with some pros and cons. If you intend to switch to variable-rate electricity, it’s best to recognize the benefits and drawbacks of the plan type. 

Benefits of Variable Rate Electricity Plans

While fixed-rate plans are more popular among consumers because of the benefits that come with them, variable-rate electricity plans can also be ideal for you. Here are some reasons to opt for these electricity plans. 

Saving on your electric bill is possible

Although fixed-rate plans offer price certainty because you pay a fixed rate until your contract ends, that advantage can turn into a disadvantage when power prices in the market dip. With variable-rate plans, you’ll get lower rates when there’s a downtrend in electricity market prices. How much you save will depend on your electric usage.

It’s easier to switch electricity providers

Plans with fixed rates often have a lock-in period, meaning that you can’t terminate your contract without incurring some charges. With variable-rate plans, you won’t need to pay a cancellation fee. As such, you can quickly switch to a new provider with lower rates if you’re not happy with your current provider’s service. 

The Drawbacks of Variable Rate Electricity Plans

While it’s possible to get a better deal if you opt for variable-rate electricity, you should also know what makes power consumers wary of signing up for this plan type. 

Changing rates in the market can mean higher power prices

Electricity prices in the market fluctuate constantly. When the price of natural gas and other fuels surges, you’ll end up paying more for your electricity consumption. 

Unpredictable electricity expenses

Even if you know how much energy you use each month, you’ll still have trouble predicting your power expenses if you’re in a variable-rate plan. That’s due to the volatility of electricity prices. So, while plans with fixed rates let you easily budget your power expenses, variable-rate plans make it hard to get a firm grip on your electricity costs. 

Difference Between Fixed-Rate & Variable Rate?

The major difference between fixed-rate and variable-rate electricity is price certainty. Plans with fixed rates make it easier to budget your electricity expenses because your per kWh rate won’t change for the duration of your contract.  

Setting aside a budget for your monthly power expenses can be difficult with variable-rate plans because the per kWh rate follows the price of electricity on the market.  

Other Energy Plans

Aside from the fixed-rate and variable-rate plans, you have a choice among multiple energy plans offered by the different power providers. The good news is that you can often get a great price for your electricity with these options, which will help reduce your power bill. Check each one to find the best energy plan for your home. 

No-Deposit Plans

Most power companies review your credit history before they provide electricity service. In most instances, your credit score will determine how much you need to put down as a deposit. No-deposit plans let you avoid the hassles of a credit check and a long-term contract. These plan types work best for those who don’t have an ideal credit score or have no credit history. What’s more, no-deposit plans often offer easy sign-ups and let you get same-day service. 

Business Energy Plans

Business owners have much higher power usage compared to residential customers. Power providers consider that and create plans to help business enterprises manage their energy costs. The rates of these plans suit the power usage of commercial users and allow them to remain competitive despite rising power prices.  

Green Energy Plans

Green energy plans use electricity coming from self-replenishing or renewable sources. These include hydropower, biomass, solar, and wind energy. Opting for one of these plans gives you a chance to lower your carbon footprint and help protect the environment. Moreover, some of these plans come with lower rates than electricity sourced from traditional power suppliers, such as oil, coal, and natural gas. 

Top Energy Companies

There are over 60 electric providers in Texas. You can take your pick from any of these companies for your electricity needs. Whatever the type of plan or contract length you want, you’re likely to find one from these providers. 

Here are some of the most popular power companies in the Lone Star State. 

Switching Power Providers

Energy deregulation makes it easy for you to switch power providers. Around 60 days before your contract with your electricity company expires, you may want to start shopping for a new plan. Here’s how you can easily transition to another energy company. 

1. Get the ball rolling by reviewing the rates of other power providers. Each of their plans has a corresponding per kWh rate. 
2. Review the plan details. Pay attention to the rates, contract lengths, and other charges associated with each energy plan. 
3. Check the status of your current electricity plan. Switching before your contract’s end might involve paying early termination fees. 
4. Contact your chosen provider and sign up. Your new power company will take care of the other details of the switch.  

FAQs

Conclusion

Fixed electricity rates are a popular choice among power customers owing to the benefits these plans offer. Fortunately, most energy companies that operate in states with deregulated electricity offer excellent fixed-rate plans.

However, this type of plan type isn’t for everyone. Those who move a lot or don’t want long-term contracts can opt for variable-rate plans. Although the per kWh rate for variable-rate electricity plans can vary each month, they can also let consumers save on their bills when the price of electricity in the market dips.

Which plan type is for you? Review your usage level and pattern to determine whether a fixed-rate plan or one with variable rates will give you greater savings on your bill.

Updated on 09-12-23