Fixed-Rate Electricity Plans

What is a fixed-rate electricity plan?

If you choose a fixed-rate electricity plan, you’ll pay the same price per kWh for the entire length of your contract. That means no unexpected jumps in your usage charges or worrying about when the next rate increase could hit your bill.

But fixed-rate plans don’t mean your electricity bills will be identical each month. They just mean that the usage charge stays the same. If you use more energy, your bill will go up, but the rate that you get charged won’t. So, while you might not be able to predict the price of your bill each month down to the exact cent, you’ll be able to figure out an estimate, so you won’t be caught off guard.

How long do fixed-rate contracts last?

Fixed-rate contracts tend to last anywhere between 12 and 24 months for residential customers. While the exact length can vary a little from one provider to the next, it’s the guideline that most follow.

What does ‘fixed’ mean in my fixed-rate energy plan?

It’s as straightforward as it sounds. The ‘fixed’ part in a fixed-rate electricity plan means that your usage charges are locked into a set price. This means your retailer can’t suddenly raise their prices a month after you sign up. Instead, you get the same fixed charges, so even if the market price of electricity rises, you’ll be sitting happily like a duck on water.

What happens at the end of my fixed-rate term?

Once your fixed-rate plan period is over, your electricity provider should get in touch. Then, you usually have the option to find a new energy plan or continue with a similar plan to before. If you don’t take action after your fixed-rate energy plan expires, then you’ll be moved onto a standing retail contract or standing offer. This will be in line with the Victorian Default Offer (VDO) or Default Market Offer (DMO). 

Pros and cons of fixed-rate electricity plans

Pros

• Your usage charges are locked in for the entire period of your plan, so they won’t change even if benchmark prices do.
• With a steady rate per kWh, you’ll be able to budget more easily without dealing with surprise charges or fees.
• If there’s a spike in the energy market, your plan won’t be affected.  

Cons

• There could be exit fees if you leave early (but these can depend on your electricity provider).
• If market prices drop, you might end up paying more on a fixed-price electricity plan than others.
• You’re locked in for a set period, so you can’t switch over to a cheaper provider whenever you feel like it.

What is a variable-rate electricity plan?

A variable-rate electricity plan is a common player on the scene. These flexible plans can sometimes be cheaper, but their rates are also more likely to change with the fluctuation of the electricity market. With a variable plan, you won’t be locked in, which gives you the flexibility to jump around to find the plan that best meets your needs.

Is a fixed-rate plan the right choice for me?

A fixed-rate electricity plan is like putting your tomato sauce in the fridge. It makes perfect sense to some, while others wouldn’t dream of it. Fixed-rate plans could be ideal if you want a set-and-forget option that doesn’t leave you stressed after reading about rising electricity costs in the Sunday paper. Where you live could come into the mix, too. In a state with less retail competition, fixed-rate energy plans could be one of the better options out there to match your needs. In the end, the choice really comes down to your household’s energy habits and how important stable pricing is to you.