Fixed Rate Electricity Plans
Find out all about fixed rate electricity plans and how they compare with variable rate energy plans here with Savvy
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Are you tired of unpredictable electricity bills that fluctuate with the market prices? Fixed rate electricity plans offer a solution. With a fixed rate plan, you can enjoy the peace of mind of knowing your electricity tariff will remain exactly the same for the duration of your contract, avoiding unpleasant rate hikes. Here Savvy explores the advantages and disadvantages of fixed rate electricity plans, helping you make an informed decision about which electricity plan may be the best one for your household.
What is a fixed rate electricity plan?
A fixed rate electricity plan is an energy plan offered by electricity retailers where the rate you pay for electricity remains constant for a specific period of time. They lock in the price you pay for your power for the duration of the contract.
With a fixed rate plan, you agree to pay a set rate per kilowatt-hour (kWh) of electricity consumed, regardless of any changes in price in the wholesale electricity market. This protects you from potential price increases during the fixed rate period.
Unlike variable rate plans, where prices can fluctuate, a fixed rate plan provides stability and certainty in terms of pricing for a period of one to two years. This may allow you to budget more effectively. Often the supply charge is set in concrete too, so that can’t be increased for the life of the plan.
Are fixed rate electricity plans common in Australia?
Fixed rate electricity plans are available in five states in Australia, but they are not as common as variable rate electricity plans. They are not available in the NT, WA or Tasmania, for example. Therefore, the majority of Aussies are on variable rate electricity plans. However, fixed rate plans are available in:
- South-east Qld
- ACT
- NSW
- VIC
- SA
What is the difference between a fixed rate and a fixed cost plan?
A fixed rate plan and a fixed cost plan are different ways that electricity retailers price their services. With a fixed rate plan, the price you pay for each unit of electricity (kWh) stays the same for the duration of the plan. It doesn't change even if energy prices go up or down. This gives you more predictable and stable electricity bills, assuming your energy usage remains constant.
On the other hand, a fixed cost plan, also known as a prepaid power plan, requires you to pre-purchase a specific amount of electricity upfront. You know exactly how much you'll pay for that amount of electricity, but if you use more than what you prepaid for, you'll have to pay extra for the additional usage.
Both plans have similar advantages, helping you budget and protecting you from price changes. Whether you can choose either of these options will depend on the plans offered by electricity retailers in your area.
Are fixed rate electricity plans cheaper or more expensive than variable rate plans?
This will depend on fluctuations in the wholesale price of electricity. If wholesale prices rise quickly in a period when you have a fixed rate plan in place, you may pay less for your power then someone on a variable rate plan.
However, the opposite also applies. If wholesale prices drop in the period when you have a fixed rate plan in place, you may end up paying a higher price for your electricity.
The decision about whether to fix your electricity rate or have a variable rate is similar to the decision about whether to take out a fixed or variable rate mortgage or home loan. If you fix your loan rates and interest rates go up, you may win; however, if interest rates fall during your fixed period, you may end up paying more.
Overall, there does not currently appear to be a great deal of price difference between fixed and variable electricity plan rates (information current as of July 2023.) If anything, fixed rate plans are currently slightly more expensive than variable rate plans.
As an example, one energy provider in NSW is offering a single rate charge of 35.145 c/kWh on its Fixed Saver plan, and 27.478 c/kWh on its Energy Saver plan. However, daily supply charges are considerably more expensive on the fixed rate plan, at 121 c/day as opposed to 97.60 c/day for the variable rate plan.
Can I switch from a variable rate to a fixed rate electricity plan?
Yes, you can switch from a variable rate electricity plan to a fixed rate plan at any time, if you can find a fixed rate plan in your area. One of the advantages of a variable rate plan is that there are no set contracts and you are free to switch electricity providers at any time.
However, if you do commit to a fixed rate plan, there may be early exit fees if you wish to change plans again during your contract period. Such fees are now less common than they were, but they can be quite substantial, as they are designed to discourage customers from breaking set contracts. For example, one national retailer charges a $110 early exit fee, while another charges a fee of $150 if a fixed supply contract is broken.
What happens when my fixed rate plans ends?
If you are on a fixed rate electricity plan, and your end date comes up, you’ll need to make a choice about what to do next. Your choices are:
- Lock in another fixed rate plan for a further one to two years
- Switch to a variable rate plan
- Do nothing, in which case you will probably be moved to a default offer plan, which may be more expensive than a variable rate plan
By comparing offers using Savvy’s free online comparison service, you’ll be able to compare electricity plans in your specific area, and choose the cheapest plan which offers the features you’re looking for.
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Disclaimer:
Savvy is partnered with Econnex Comparison (CIMET Sales Pty Ltd, ABN 72 620 395 726) to provide readers with a variety of energy plans to compare. We do not compare all retailers in the market, or all plans offered by all retailers. Savvy earns a commission from Econnex each time a customer buys an energy plan via our website. We don’t arrange for products to be purchased directly, as all purchases are conducted via Econnex.
Any advice presented above is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an energy plan. For further information on the variety of energy plans compared by Econnex, or how their business works, you can visit their website.