GoodCharlie Blog

What is the Difference Between a Fixed and Variable Term Electricity Plan

Written by Daryl Lawrence | Jan 24, 2023 8:58:25 PM

Most Texans living in a deregulated part of the state can choose between hundreds of electricity plans. Each plan might have a different rate, rewards, terms, conditions, or structure, making it tough to find the right one. One of the many keys to choosing the right electricity plan is to decide if you want a fixed or variable-term plan. 

In addition to fixed and variable terms, there are prepaid and flat-rate plans. Because of the wide array of plan options, choosing the right one for your needs can be difficult. If you're in the market for a new electricity plan and can't decide between a fixed and variable-term option, you've come to the right place. This article will break down each type of plan and help you make the right decision. 

 

  1. What is a Fixed Term Electricity Plan? 
  2. What is a Variable Term Electricity Plan? 
  3. Pros and Cons of Variable Term Plans 
  4. Pros and Cons of Fixed-Term Plans 
  5. Who to Turn to for the Best Fixed Term Electricity Plans in Texas

 

What is a Fixed Term Electricity Plan? 

Fixed-term electricity plans, also known as fixed-rate plans, are the most common type in Texas. Here are some of the specifics of a fixed-term plan. 

  • You must sign a contract for a term of one to five years. 
  • You'll keep the same electricity rate that you have when you sign up. 
  • You'll pay for electricity usage at the end of the month based on how much you use. 
  • Fixed-term plans often have more rewards and benefits than variable-term plans. 
  • You will have to pay an early termination fee if you exit your contract before the end of your term. 

 

All in all, fixed-term electricity plans are very similar to fixed-rate mortgages. You have the assurance that your rate isn't going to go up, but you also don't have the option of taking advantage of rate dips. Fixed-term plans offer stability and consistency, but don't have flexibility or leeway built into them. 

What is a Variable Term Electricity Plan? 

Variable-term electricity plans are the polar opposite of fixed-term plans in almost every way. With a variable-term plan, you don't have to sign a contract, which offers much flexibility. Here are the specifics of a variable-term plan in Texas. 

  • You don't have to sign a long or short-term contract. 
  • You can switch plans and providers at the end of any month. 
  • Your rate will fluctuate with every new month, which could be good or bad depending on the electricity market. 
  • You don't have to worry about early cancellation fees since there isn't a contract. 
  • Variable-term plans often don't offer rewards since you are not obligated to stick with a company long-term. 

 

If you value flexibility, freedom, and versatility, variable-term electricity is right for you. Variable-term plans are also great for people who are new to the state and want to avoid making a long-term commitment to an electricity company. However, saving money with a variable-term plan is challenging in the long run. 

 

Pros and Cons of Variable Term Plans 

Pros 

Flexibility 

The biggest advantage of variable-term electricity plans is their flexibility. The fact that you don't have to sign a long-term contract is huge for some Texans. Only some people own their own homes and plan on living in the same place forever. Therefore, variable-term plans are a good way to avoid early cancellation fees. 

You Might Save Money

Variable-term electricity plans are a bit of a gamble. Depending on what the market does, you could save a ton of money! However, if the electricity market plummets, you will benefit from low electricity rates. 

Cons

Few Rewards or Perks 

Retail electric providers in Texas tend to reward loyalty. Therefore, when you sign up for a variable-term electricity plan, the company offering the plan doesn't feel obligated to reward you in any way. You aren't making a long-term commitment to them and might leave at any time. 

You Often Don't Save Money 

As we said before, variable-term plans are a gamble. While you have the potential to save big bucks, most people end up overpaying for a variable-term plan. On average, variable-term rates are several cents higher than fixed-term rates. 

Pros and Cons of Fixed-Term Plans 

Pros 

Stability and Protection 

The biggest advantage of fixed-term plans is that they offer stability and protection against price hikes. Your rate won't change from the time you sign up for the plan, which is great in the present uncertain economy. 

The Potential to Lock in a Low Rate 

The beautiful thing about fixed-term plans is that you aren't forced to sign up for them right away. If the rates are higher than you prefer, you can either shop around for a better option or find a variable-term plan for a month or two until the rates come back down. When they do, however, you should act fast and lock in a low rate! 

Perks and Benefits 

In general, REPs will appreciate your loyalty and willingness to sign a long-term contract and reward you accordingly. 

Cons

Potential Fees 

In addition to early cancellation fees, fixed-term contracts tend to have other fees you should be aware of. As long as you sign up for a plan with a reliable company with transparent plans and rates, you have nothing to worry about. 

Tiered Rates

The biggest con of fixed-term plans is that they often have tiered rates. Tiered rates are where you pay a different rate based on the amount of electricity you use. REPs can get away with this because they list their tiered rates in the contract when you sign up, and they stay the same throughout the contract. Therefore, you must know how much electricity you use per month before signing up for a fixed-term plan. 

Who to Turn to for the Best Fixed Term Electricity Plans in Texas

As you can see, there are pros and cons to both fixed and variable-term plans. Ultimately, each person must decide what's best for them and their household. However, if you choose to go the fixed-term electricity route, contact us at GoodCharlie Energy. We offer some of the lowest electricity rates in Texas and one of the best reward packages

You also don't have to worry about hidden fees thanks to our transparent plans that are easy to read and understand. We also don't have massive gaps within our electricity tiers, which means you won't overpay if you use too much or too little power. Contact us to learn more or to make the switch today!