When looking for the right energy plan for your business it is important to know what options you have. Electricity and Natural Gas suppliers are going to offer you variable and fixed rates and understanding how these plans work will help you choose which is best for you.
What is a fixed-rate energy plan?
A fixed-rate energy plan is where the price you pay per kilowatt-hour (kWh) stays the same throughout the contract. So no matter what happens to the energy market, your energy rate will not be affected. And since you have a set price, you can plan for how much you’ll be spending month to month.
This doesn’t mean that your bill will always be the same though. Your rate is still applied per kilowatt-hour. So, your monthly bill depends on how much electricity or gas you use that month + any additional fees from the utility company. You can look here to get an idea of the average fixed electric rate that you’ll pay depending on what state you live in.
When you are trying to choose the right energy plan for your business keep these pros and cons in mind:
The benefits of choosing a fixed-rate plan
- Having a fixed rate contract guarantees that your per-kilowatt-hour rate will not go up for any reason for the duration of the agreement protecting you from spikes in energy costs.
- It allows you to be much more specific when budgeting your energy costs. You can look at your past usage to determine roughly how much you will use in the upcoming months and apply that to your fixed rate to determine roughly how much your bill will be.
- You can usually get a lower price with a fixed rate contract.
The disadvantages of a fixed rate plan
- Market prices could drop below your fixed rate. However, it would have to remain lower for an extended period of time for market prices to be cheaper.
- Possible early-cancellation fees if you decided to end or change your plan.
What is a variable-rate plan?
A variable rate is based on the market and is changing constantly. This means what you pay per kilowatt-hour one month could be lower or higher (sometimes significantly) month to month. Factors that influence the price include temperature, weather conditions, supply, demand, gas storage, government regulation, imports and exports, etc.
The benefits of a variable-rate plan
- In a market where energy prices are falling, a variable rate could end up saving you the most money. You’ll be able to take advantage of the declining market rather than being stuck in a contract at a higher price. Variable rates work best for customers who actively keep up with the energy market and are always on the lookout for the best price. However, in our 22 years of experience keeping track of the market and entering a fixed rate contract when prices bottom out is the best way to save money in the long term
- There aren’t any cancellation fees.
The disadvantages of a variable-rate plan
- Your rate is constantly changing and will increase as market prices go up.
- Since your rate is always changing it makes it hard to accurately budget your energy costs for upcoming months.
- Unexpected spikes may increase your bill significantly.
Choosing the best option for your business’s specific needs
Ultimately there is no one-size-fits-all solution to always get the lowest price, so the answer will vary customer to customer. But with proper research and 22 years in business we find customers tend to do best in the long run with a fixed rate. Most of the time the question is how long should the contract be (1-5 years). We have many customers on longer term contracts who are saving tens of thousands of dollars or more over the course of the contract. We also have some customers on short contracts (1-2 years) as we expect to be able to get them better pricing in the near future.
If you are a very large business, manufacturer, operate in off-peak hours, etc. you may qualify for custom pricing and neither of the above options would be right for you. If you think you may qualify, contact us for a free rate analysis.
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How do you know if you are on a fixed or variable rate?
By default your local utility company is going to be supplying you with your electricity and natural gas (unless you are in Texas) at a variable rate.
If you are unsure what kind of rate you are on, you can find out what kind of energy plan you have by checking your most recent electricity or natural gas bill. Depending on what state you are in and what utility you are with you will look for the “energy charge,” “electric supply,” etc. section of your bill.
As you see in the picture above shows multiple different rates which means you are on a variable rate plan.
Now if it shows a single static rate you are likely on a fixed rate.
Now that you’re familiar with your options you can start looking for pricing. I recommend that you get pricing from at least 5 different reputable suppliers before making a choice.
Or you could hire us and we will get pricing from every reputable supplier in your area (over 20 in some cases) and give you the best currently available price!