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What are fixed-price energy plans?

What are fixed-price energy plans?

Electricity and gas bills vary each month, which can make it difficult to budget. A fixed price energy plan may help solve this problem. 

When you look at your energy bills, you may notice a supply charge that’s fixed and a usage charge that’s variable, based on your consumption. It generally means you get a higher or lower electricity and gas bill depending on the amount of energy you consume during the month.

There are other reasons why your energy bills fluctuate, such as limited-time discounts. Further, you may be on a plan that charges you more at times when your consumption crosses a certain threshold or one that charges more during certain seasons. All these variations in energy bills can make it difficult to budget and some people feel anxious wondering how much they may pay for their power each quarter. 

For some people, it’s easier to plan expenses if they know exactly how much their electricity and gas bills are going to be. Fixed-price energy plans can offer bill certainty. However, sometimes that certainty comes at an additional cost. . Let’s see how these plans work. 

Are fixed-rate and fixed-price energy plans different?

Some of us may mistakenly assume that a fixed-rate plan is the same as a fixed-price one, but these two terms actually mean very different things.

A fixed-rate plan simply means that you pay a flat rate for each unit of electricity that you consume, irrespective of the time of day or day of the week that you use it. Such a plan is also called a flat-rate or single-rate tariff plan. The fixed-rate is expressed as cents per kilowatt hour or c/kWh. You can look for some of the best fixed-rate energy plans by comparing the rates, features and terms that different providers offer. Gas contracts are usually fixed-rate energy plans and the rate is in cents per megajoule or c/MJ. 

Most energy retailers assure customers that the fixed-rate for gas or electricity will not be increased for the next 12 months. Some commit to letting you know well in advance of a rate change. 

If you are on a fixed rate energy plan, your bill amount still changes every month because your consumption varies. On the other hand, a fixed-price energy plan allows you to lock the amount that you will pay each month for electricity and gas. This fixed-price is usually valid for a year. Your energy retailer may create a tailored contract for you, based on your past usage pattern and offer you a fixed price for energy.

How do fixed-price energy plans work?

The Predictable Plan by Origin is an example of a fixed-price energy plan. Customers can lock in their energy costs for one year and pay a fixed amount each month or fortnight. Your bill amount does not change based on your consumption and the rate you are charged for energy also does not increase for a year. 

You may be able to get fixed-price energy deals for both electricity and gas. The retailer may ask for details of how much energy you’ve previously used over a few months at your address. This enables them to estimate your consumption pattern and create a fixed price energy deal for you. 

With a fixed price energy plan, you can budget for your gas and electricity expenses precisely. You don’t need to worry if your home requires more heating during the winter, as your bill amount is fixed. Some people find their electricity and gas bills too complicated to understand, making it difficult to know whether they are getting the best deals. Fixed-price energy deals simplify the billing process completely. 

A possible disadvantage of any fixed price energy plan is that you may be paying a higher rate than you would for a flexible plan. Also, during the months when you consume less electricity, you won’t get the benefits of lower energy bills. 

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This article was reviewed by Head of Content Leigh Stark before it was published as part of RateCity's Fact Check process.



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