Fixed vs Variable Rates: Which can save you more?
AGL has announced plans to give automatic discounts to customers paying the most for electricity.
What type of energy consumer are you? Do you frequently explore the energy market to look for the best deal, or you choose to be content with your fixed rates?
First, let’s differentiate fixed and variable rates to help you understand better.
Variable rate energy plan
- A variable rate is the standard energy plan offered by most of the retailers in NSW, VIC, SA, and southeast QLD. Your energy cost is highly dependent on market prices. The higher the market price, the higher your rates or vice versa.
- No exit fees. So, it’s easy to switch whenever you want and take advantage of the best energy deals in your area.
- Market prices are continuously rising for the last two years.
- It gives you the freedom to change plans and locations without hassle as you are not locked into a long-term contract.
- The instability of energy market prices will increase your energy rates.
Fixed rate energy plan
- A fixed rate energy plan is an agreement which usually lasts from 12 – 24 months, where the electricity supplier does not change rates per kilowatt-hour during the contract period.
- A termination fee of around $50-$100 is required to be paid if you wish to leave before the contract ends.
- Even if market prices climb up, your rates remain the same.
- You’ll get stuck paying a higher price until your contract ends while others can pay less by switching.
- It prevents surprise bills and convenient from a budgeting point of view.
Fixed vs Variable energy rates per state
|State||Average Fixed Rate Prices||Average Variable Rate Prices|
Average costs based on statistics (quarterly usage calculation) from AER for a five-person household.
Based on these figures, you’ll probably choose a variable rate offer without a second thought. But do not forget to consider things like rising prices and convenient budgeting.
If you’re sick of switching energy retailer you may choose a fixed rate plan. However, if you enjoy shopping around to find the best deal, go with a variable rate plan.
Which way should you go? Start by comparing your gas and electricity rates with Econnex.