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Jul 27, 2022

Peak Energy Costs: Choosing a Fixed or Variable Rate Plan

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It’s summer, which means air conditioners are running almost constantly across Texas. Because demand is high, residents are paying more per kilowatt hour (kWh) for electricity. But if you’re moving to a new home or your current plan is expiring, what is the best type of electric plan to buy during peak energy prices? 

Two types of plans that are available through retail electric providers across the state include fixed rate and variable rate plans. Explore the advantages and disadvantages of each plan below to determine which type of plan is right for you — and when it’s the best time to buy.

 

Fixed Rate Electricity

A fixed rate plan locks in the price per kWh for the length of your contract. These plans typically range from three months to 60 months, depending on the provider. The price doesn’t change based on the market price of electricity, whether it’s high or low.

Advantages: Consistent pricing makes it easy to predict your monthly electricity bill. Your bill will fluctuate based on the amount of electricity used, but the price per kWh will stay the same. Estimating your monthly kWh will help you budget. Fixed plans also help customers avoid price spikes based on weather emergencies or limited energy supply.

Disadvantages: There is often a fee to terminate your plan early or change plans. This fee may be offset, however, if the company you choose has a reasonable cancellation fee like Payless Power or you lock in at a low market price. Finally, if you choose a fixed rate plan during peak energy rates, like elevated summer prices, you may lock into a higher rate. 

 

Variable Rate Electricity

Variable rate plans are charged per kWh based on the market, which is influenced by the temperature, weather, and supply and demand. These can change daily, monthly, or even seasonally. 

Advantages: If you moved or are planning to move soon, a variable rate plan provides electricity without locking into a plan that might not be right for you. Variable rate plans often require no fees to cancel or switch, while fixed rate plans do. Plus, if market rates are lower, then you may pay less per kWh than residents on a fixed rate plan, especially those who are locked in during high market prices.

Disadvantages: A variable rate means electricity prices fluctuate, making your monthly expenses less predictable. Price spikes can impact your bill, as influenced by market conditions, weather extremes, and supply issues. 

 

Peak Summer Rates: Which Electricity Plan is Best?

Only you can determine what you value most in an electricity plan: flexibility or predictability. In the summer of 2022, energy prices are high due to many factors, including extreme heat, national inflation, global current events, and a growing Texas population (aka more demand). 

If you can accept the risk of fluctuating prices with a variable rate in the short-term, you may choose to wait until milder autumn and spring temperatures when energy rates typically go down. Once you see a drop in rates, you can lock into a fixed rate electricity plan.

Keep your cool and ask yourself these questions when choosing an electricity plan:

  • What are my typical monthly power needs? (You can look back on previous bills for kWh used each month.)
  • Am I moving soon, needing a plan that’s easy to cancel?
  • Do I need a predictable monthly rate?
  • Can I wait to lock in to a lower rate when the weather is milder?
  • Can I financially handle short-term rate spikes to achieve long-term savings?

Payless Power currently offers two fixed rate electricity plans with short contract terms (six or 12 months). These plans provide predictability and stability, yet shorter terms that won’t lock customers into a years-long plan that makes them feel stuck. Even during peak seasons, customers can save money each month by adjusting their energy consumption. Plus, easy payment options through our MyAccount portal or over the phone mean you can pay when it’s convenient for your household budget. You can add funds any time to keep a positive account balance.

 

Enter your Texas zip code and discover an affordable, reliable Payless Power plan for your home today.

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