When it comes to paying for electricity, most utility providers offer two major options: fixed rate plans and variable rate plans.
With a fixed rate plan, those who purchase electricity will pay the same regardless of any market fluctuations that take place in the cost of energy throughout the life of the plan. On the other hand, payments made on variable rate plans will fluctuate according to market changes regarding the cost of energy.
It's not always easy for those who purchase electricity to know which option is best. However, anyone regularly purchasing electricity from a utility provider will most likely find a fixed rate plan beneficial in the long run for the following four reasons:
Paying your electricity bill is simplified.
If you are on a fixed rate plan and you're consuming the same amount of electricity each month, your payment amount will stay the same throughout the life of your plan.
With a fixed rate plan, you will always know what your bill amount will be. This way, you can always make out your payment for your electricity it without having to consult your records or bills.
You'll pay less if rates go up.
Those who choose fixed rate plans really come out ahead when electricity rates go up over the life of their plan.
When this happens, they get a discounted rate on the electricity they use while their electricity provider must honor the reduced rate and eat the loss.
Budgeting is easier.
One of the most important tasks for managing a household or business facility is budgeting for routine costs. However, budgeting for electricity payments is difficult if your payment amount changes each month.
With a fixed rate plan, you can factor your exact electricity costs into your budget well into the future. This simplified budgeting makes it easier to predict how your finances will look in the coming weeks and months.
You can switch to lower rates at the end of your term if rates drop.
Although your electric rates will stay the same if you're on a fixed rate plan even if the market cost of electricity drops, you can change your fixed rate to reflect the actual market price once your plan term is finished.
A fixed rate electricity plan is not permanent. When you sign on for your plan, you can typically specify between a variety of different term lengths. If you shorten the term length of your plan, you will take advantage of the fixed rate predictability of your electricity bill over the short term while minimizing any higher prices you might have to pay when market prices go down.