Selecting a home electricity plan seems like it should be easy, but the different energy plan options make it more complicated. Depending on your area, searching for “electricity plans near me” or “electricity plans in my area” can yield several results. Different energy plans will have unique pros and cons, some of which may work better or worse for you, depending on your energy needs, budget, and other factors.
Understanding the various options for energy plans, as well as recognizing how you use electricity, can help you choose the best, cheapest energy plan for you and your family. Below are five common types of electricity plans:
- Fixed-Rate Energy Plans
- Variable Energy Plans
- Market-Rate Energy Plans
- Time-of-Use Energy Plans
- Prepaid Electricity & Energy Plans
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Learn more about each type of energy plan and when it is best to use through the descriptions below.
1) Fixed-Rate Energy Plans
A fixed-rate plan gives you a set energy rate for the duration of your service contract. The only fluctuation you’ll see here is with various distribution and administrative fees, however, the price per kWh you pay should remain the same. The only risk with this option is that if energy prices drop, you’ll be stuck paying the fixed rate you initially agreed to pay. On the flip side, however, if energy prices go up, you still maintain the lower energy price. Fixed plans make it clear how much your energy bill will be every month. This is a very low-risk plan, so if you like stability and predictability, the fixed-rate option is for you.
2) Variable Energy Plans
A variable plan is the opposite of a fixed-rate plan. With a variable-rate plan, you pay month to month for your energy. The price will fluctuate based on market demand as well as your electric company’s policies. The benefit of this option is that you can take advantage of falling energy prices and pay that lower rate. Of course, if energy prices shoot up that also means you’ll be stuck with the higher price. There’s a bit more risk involved with this option, but also more flexibility. Since variable plans usually don’t have a cancellation fee, you can switch energy providers or plans whenever you want.
3) Market-Rate Energy Plans
Market, or index, plans are a bit more involved than the previous two options. Similar to variable plans, market-rate plans will fluctuate each month. The difference is that the market rate is based on a publicly available index. Ask your electric company about the pricing formula they use and get specific information on how their index works. You’ll also want to know how you’ll be notified of pricing index changes if you select this plan option. Market plans are extremely volatile and are mainly utilized by businesses who want to avoid time-of-use plan premiums.
4) Time-of-Use Energy Plans
Some energy companies offer plans that have different rates for certain times of the day. By adjusting the rates based on the time of day, energy companies can incentivize customers to use energy when it is cheaper to generate the energy. This also works in the customer’s favor because they can do heavy-energy chores like the laundry or running the dishwasher during times when they’ll be charged less for the energy usage. The time-of-use plan can be very affordable if you don’t mind working your chores around the energy schedule.
5) Prepaid Electricity & Energy Plans
With a prepaid electricity plan, you can take control of your energy by paying a certain amount upfront, and you’re charged based on your usage.
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Prepaid plans often come with different benefits, so check with varying providers of energy. Providers will often offer a discount if you keep your prepaid balance above a specific usage. Some households prefer prepaid energy plans to hold themselves accountable for how much energy they’re outputting.
Prepaid plans are also great for opportunities to learn about efficient energy usage. Individuals can take charge in delegating how much to spend on energy by putting money in their energy account each month. It is crucial to keep an eye on consumption and to practice best practices to make your energy usage efficient to keep the costs low yet output high.
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Which Energy Plan is Best for You?
It’s important to understand your energy plan options. The right plan can help you save money and be more aware of your energy usage. Before making your decision, ask your energy provider for specific details on the benefits and discounts associated with each plan. Then consider your personal habits. If you like schedules, then a time-of-use plan could be a good option. If you’re better with budgeting, then a prepaid plan could help you reduce your energy usage and save money. Each plan works for different people, so take the time to figure out which one fits your lifestyle and budget needs.
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