The Pros and Cons of Fixed-Rate Energy Plans

Are you ready to lock in a great rate on electricity? If so, it’s time to get familiar with fixed-rate energy plans and take a look at the pros and cons of this type of energy plan. Fixed-rate plans are popular because they protect consumers from volatile market prices. However, it’s important to look at the whole picture before you decide if a fixed-rate plan is right for you. You have the freedom to compare energy plans and the power to choose the right options for your home.

The Pros of Fixed-Rate Energy Plans

1.) Fixed-rate energy plans offer protection against market volatility and provide customers with long-term stability when it comes to their utility bills. With a fixed-rate energy plan, you’ll pay the same price for your electricity supply each month during the contract period which can be anywhere from six months to three years. If you’re currently on an adjustable-rate plan and would like more stability in your monthly utility bill, then a fixed-rate energy plan is an excellent choice.

2.) You can lock in a low rate on electricity. A survey of the top 100 utilities in the United States found that on average, rates are 60 percent higher than the lowest available fixed-rate plan. Homeowners may not have realized how much they could save by choosing a fixed-rate energy plan over an adjustable-rate plan, but now they’ll know for sure!

The Cons of Fixed-Rate Energy Plans

1.) Some utilities will charge a large fee for breaking your contract early. Because a fixed-rate energy plan is a legally binding contract, there can be hefty fees for canceling a fixed-rate agreement before the term is up. Be sure to familiarize yourself with the cancellation policies of any fixed-rate plan you’re considering so that you know what to expect if you need to opt-out early.

2.) With a fixed-rate plan, your rates won’t change over the duration of your contract for up to three years. If market prices drop, you’ll continue to pay the same rate per kWh that the initial contract stated even if rates, in general, have dropped.

The Bottom Line

Fixed-rate energy plans are not for everyone. There are definite pros and cons that need to be carefully weighed before you choose this type of plan. It’s important to remember that with this type of plan you’ll need to lock in your electric rates as it reflects the current market. If market prices drop significantly, then you may end up overpaying as compared to what may appear as a lower variable rate now; but if market prices rise those higher rates could make them unaffordable in the future. This means that there are always great benefits, but still risks involved when choosing a fixed-rate plan.