Fixed vs Variable Rates
Which contract should you choose, and why.
It is important to know the difference between fixed and variable rate plans when analyzing your electricity needs. While the majority of commercial businesses prefer and are more benefitted by a fixed contract, variable rate contracts also have their pros. Below is a side-by-side comparison of the two, and how you can use them for your advantage.
Variable Rates
Price per kWh is constantly changing based upon the wholesale electricity market conditions.
When market prices increase so does your rate, but when market prices drop your rate does as well.
If you follow the market closely and have the ability to adjust your electricity usage accordingly, then it’s possible to save money.
Ever-changing rates make it difficult to produce an accurate budget.
Extreme weather temps may cause your rates to spike dramatically.
Fixed Rates
A fixed price per kilowatt hour (kWh) that remains in effect through the life of the contract. The price will not change during this time.
If market prices fall during the term of your contract you will not be able to take advantage of the lower rates.
A fixed rate has a slightly higher premium due to the guaranteed price.
Hedges against the risk of rate fluctuation and provides for accurate budgeting.
Extreme weather temps will never change your rate.
Based on the above information it’s easy to understand why a fixed rate is the most popular choice for businesses, but if you have a unique business set-up that is able to take advantage of a variable rate then you should speak with a professional and weigh your options.
