Pros and Cons of Variable-Rate Plans

May 20th, 2025 By Casey Thornton | Fact Checked By EO Test Reviewer

If you have been searching for a little while or if this isn’t your first rodeo with energy plans, you have probably heard of the variable-rate plan. It is incredibly important for the consumer to be fully aware of what you are getting into when making a decision about your next energy plan. You want to make sure you are making an informed and clear decision that will only benefit you.

Variable-Rate Plans Explained

So what is a variable-rate plan anyways?

A variable-rate plan is an energy plan where the rate you pay per kWh for energy will change throughout the plan term.

The change in price can be due to a number of different factors, including changes in supply or demand charges, the market rate, the fluctuations of natural gas futures prices, and more.

However, it can be difficult to pinpoint what specifically causes variable-rate plan rates to fluctuate. This is because the increase or decrease in the rate paid for energy can be different for each company and even customers within a certain company. Sometimes these changes happen frequently and other times they only occur occasionally.

This makes it incredibly difficult for the consumer to understand exactly what causes your variable-rate plan rate to change and what you can do to prevent it from going up or down.

Pros of Choosing a Variable-Rate Plan

There are a number of pros to choosing variable-rate energy plans.

1.) Save money!

First and foremost, you have the potential to save money. Since the rate you pay per kWh can change throughout the plan term, you could end up paying less for your energy than you would with a fixed-rate plan.

2.) Perfect for your budget

Another pro is that it can be easier to budget for your monthly energy costs when you have a variable-rate plan. This is because you know that the price could go up or down each month, so you are able to plan for either scenario.

3.) You can take advantage of low rates in the energy market

Finally, having a variable-rate plan gives you the opportunity to take advantage of market lows. If the market low is lower than your rate, you will end up saving money. However, if the market rate is higher than your fixed-rate plan, you will end up spending more on energy.

Cons of Choosing a Variable-Rate Plan

Now that we covered the pros of having a variable-rate energy plan, let’s take a look at the cons.

1.) No control over fluctuations

The first con is that you do not have control over fluctuations. Since it is difficult to predict exactly what causes rate changes, this can be somewhat of a headache for the consumer.

For example, if you’re on vacation for one month and your energy usage is low compared to usual, you could end up spending more than normal because the rate is higher that month. Even though you are spending less energy using the same amount of electricity, your payment could end up being more because of the rate.

2.) Difficult to understand market prices

Another potential con is that it can be difficult to understand how market prices affect your bill. This may lead to some customers not having a clear understanding of their monthly budgets each month.

3.) There is not always a huge difference in price

Lastly, if the change in the rate for energy is not significant enough, you might not notice side-by-side comparisons. This can make it harder to differentiate between variable-rate plans and fixed-rate plans if there isn’t a big difference in price.

Overall, whether or not consumers choose to have a variable-rate plan all comes down to preference.

Weigh the pros and cons carefully to determine if you should have a variable-rate plan or not. Keep in mind that companies will often have different terms for whether or not they allow customers to change plans during the contract term, so be sure to read all fine print before making a decision.

Save on Electricity