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Energy Choice | August 15, 2012

All Things Electricity: The differences between variable-rate and fixed-rate plans

As one of the nation’s leading energy suppliers in more than 46 states and the District of Columbia, we are committed to helping our customers identify, understand, and manage the variables that affect electricity prices. With that said, here’s a quick primer on these plans and the factors you should consider when making a choice.

Options Explained

As its name implies, fixed-rate plans are just that. Even if market energy prices fluctuate, which they do every monthly billing cycle, you pay a set energy price per kilowatt hour over the course of your contract. In other words, even if prices move up or down, you pay the same energy price for every kilowatt-hour you consume.

Available in every state we serve, fixed-price plans offer customers certainty and predictability, no matter what happens in the global energy market.

While a fixed-price plan protects customers from market volatility over a specific period, month-to-month or variable plans provide greater flexibility. Available only in select states, like New Jersey, which requires all competitive energy suppliers like Constellation to offer a variable price at the end of a fixed-price contract, variable plans are based on prevailing market conditions. The rate may vary from month to month and may at times be either higher or lower than fixed-price options.

The variable monthly price consists of a variable energy charge, a retail service charge, and applicable taxes as provided in the terms and conditions of your selected plan. The retail service charge may change for each billing period.

Because energy rates do change, customers who choose this option must have a higher tolerance for uncertainty and risk.

Do Your Homework

Whichever you choose, make sure you’re aware of all fees, tariffs, and taxes associated with the plan. You also should be aware of your average energy consumption before locking into a contract.  That knowledge could help you decide which option is best for you.

In Texas, residents can also choose index plans, which we will cover in a future post.

If you have questions about any plans that you may be evaluating, Constellation’s are described on www.home.constellation.com, don’t hesitate to leave me a comment. Our goal is to empower you so that you make an informed decision that best meets your needs.

Comments ( 2 )

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Conor - 10/12/2012

Does the variable rate change daily or how exactly is the price set from month to month or day to day. I can’t find any information on your site to explain the system. Please let me know. Thanks.

    From All the Authors of Energy4Home - 10/24/2012

    Hi Colin, We apologize for the delay! The variable rate is based on prevailing market conditions. The rate may vary from month to month and may at times be lower than fixed price options. We hope this answers your question! Thanks, The Constellation Social Media Team

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