When it comes to electricity, choosing the right plan for you is important. And while there are many types of plans, two popular options stand out: fixed-rate electricity and variable-rate electricity plans. But when we compare fixed rate vs. variable rate electricity, what are the pros and cons, and how do you determine which is right for you? How will they impact your monthly bill?
If you’re a Texan, you might have specific questions about the differences between these two pricing types in the context of the unique Texas electricity markets. This guide aims to provide answers and help you make an informed choice.
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What Is Fixed-Rate Electricity?
Fixed-rate electricity plans mean the price you pay for each kilowatt-hour (kWh) remains the same throughout your contract term. However, it’s important to remember that a fixed rate doesn’t imply your energy bill will be identical each month. Your bill’s total still depends on how much energy you consume during the billing period. So even with fixed-rate electricity plans, Texas residents will find their bill varies depending on usage. Your Gexa Energy price per kWh will remain stable under this plan.
How long do you have to lock into a contract with a fixed-rate electricity plan?
On average, fixed-rate plans range from 12-36 months. However, some companies offer as little as three months of fixed-rate electricity, while others provide as much as 60 months. Going with a plan that locks you into a fixed rate for either a very short or long period of time can be risky. Some companies will offer a short-term fixed-rate electricity plan when energy prices are at their lowest.
Gexa Energy’s 100% green fixed-price residential electricity plans cater to savvy consumers who know that locking in for too short or too long isn’t beneficial to them in the long run.
What Is Variable-Rate Electricity?
Variable-rate electricity plans have pricing that can change monthly. These fluctuations can be tied to current market prices or other criteria set by the retail electricity provider. You could benefit from lower energy costs in some months, while in others, you might pay a bit more.
Variable plans are the standard plan offered by most retail electricity providers. You’ll typically have more flexibility on this type of plan, including no early termination fees. This means that you could benefit from lower pricing, and then, if your energy costs start going up seasonally, you could turn to a fixed-rate plan when it’s convenient.
What can affect the price of a variable-rate?
- Peak usage periods
- Geopolitical influences
- Ageing infrastructure
- Transition to renewable energy sources
- Network costs
- Government policies
Fixed-Rate vs. Variable-Rate Electricity
- Price Stability: With fixed-rate energy plans, you have peace of mind that your price will remain consistent. In contrast, variable-rate plans can fluctuate.
- Budgeting: Fixed-rate plans are more suitable if you prefer predictable bills to help with budgeting. Meanwhile, those willing to take a chance with market conditions might opt for plans with fluctuating energy costs.
- Contract Length: Fixed-rate plans often come with a longer contract, providing long-term energy cost security. Variable-rate plans are month-to-month.
- Texas Power Grid: Given the occasional unpredictability of peak residential energy usage in Texas, fixed-rate plans can offer Texans some peace of mind. Extreme market conditions might influence variable-rate plans.
At its core, the difference between a fixed rate and a variable rate is how the cost is determined:
Fixed-Rate Electricity Plans: With fixed-rate electricity plans, customers agree to pay a predetermined Gexa Energy price per kWh for their electricity, regardless of market price fluctuations. This price remains constant throughout the term of the contract.
Variable-Rate Electricity: Variable-rate electricity, on the other hand, means that energy costs per kWh can fluctuate based on the market conditions. This could be influenced by factors such as demand, supply, and other market dynamics.
Pros and Cons of Fixed and Variable Rates
Neither plan is inherently better; it’s all about your personal needs and preferences.
Pros of Fixed-Rate Electricity Plans:
- Stability: Your price won’t change, even if the market price of electricity goes up. This can be especially beneficial for those on a tight budget who need predictable costs.
- Savings: If you lock in a low Gexa Energy price per kWh when prices are expected to rise, you could save money in the long run.
- Predictability: While your monthly bill may vary based on how much energy you use, the price you pay per kWh will not.
Pros of Variable-Rate Electricity Plans:
- Potential Savings: If market prices drop, you might end up paying less per kWh than someone on a fixed-rate plan.
- Flexibility: Without long-term contracts, you can switch plans or providers without penalty if you find a better deal.
- Adaptable to Market Conditions: Prices might decrease when supply is plentiful and demand is low.
Answering Your Questions
Is a variable-rate or fixed-rate better for electricity?
It depends on individual preferences. If you prefer stability, a fixed rate is better. However, a variable rate might suit you if you’re open to fluctuations and potential savings.
Is a variable-rate cheaper?
Not necessarily. While variable rates can be more competitive during times of low demand, they can also be higher when demand spikes.
What is the difference between a fixed-rate and a variable-rate?
A fixed rate includes pricing per kWh remains consistent throughout your contract, while a variable rate can change monthly based on market conditions.
Is it better to get a variable-rate?
It’s better if you’re willing to gamble with market conditions. However, it comes with more unpredictability on your utility bill.
Gexa Energy and Your Choices
Whether you’re looking at fixed-rate electricity plans in Texas or considering the flexibility of a variable rate, Gexa Energy electricity plans offer a range of options to suit your needs. Whichever plan you choose, Gexa Energy can help you learn ways to save energy at home and save on your electric bill. Creating an energy-efficient home by adjusting your thermostat settings or investing in a smart thermostat can help you manage costs and contribute positively to the Texas power grid.
In conclusion, the choice between fixed-rate electricity and variable-rate electricity largely depends on your needs, risk tolerance, and the current market conditions. It’s essential to weigh the pros and cons of each and select the one that aligns with your household’s electricity needs.
**In this article, the term "Price" refers to the average price per unit of electricity used (kWh). Note that for many electricity plans, this average price remains fixed and does not vary throughout the day, including during peak usage times. "High Usage" implies using more electricity than the average home in your area, which may result in a higher total bill due to increased consumption. "Peak Usage" pertains to the specific times (commonly 4 – 9pm) when electricity use is highest. The article also discusses Variable-Rate plans, which may feature a variable price by month. Readers should consult their electricity provider for the specifics of their own plan and pricing.
