Fixed Rate Plans vs. Variable Rate Plans
From cooking to heating buildings, we use natural gas for a variety of purposes. Deciding which natural gas plan is best for you can be a tough choice. Customers typically choose from fixed or variable rate plans; both of which have advantages and disadvantages. But what’s the difference between the two, and what benefits do they provide? Here we’ll discuss fixed rate plans vs. variable rate plans so you have a better understanding of which one is right for your commercial or industrial business. In addition, we’ll cover how to switch to another plan of your choice.
Fixed vs. Variable Gas Rates
Before settling on a natural gas plan, it’s crucial to be aware of the differences between fixed and variable gas rates. We suggest taking your budget and your ability to track market prices into account, along with others factors. Below we will outline the differences between fixed and variable gas rates, and highlight the advantages and disadvantages for each one.
Fixed Rates
Unlike variable rates, fixed rates stay the same during a certain number of billing cycles or throughout an entire contract term. The rate is set per 100 cubic feet (Ccf), one thousand cubic feet (Mcf), kilowatt-hour (kWh), or Therms price. Customers who choose fixed rates can rest assured that the price on their monthly utility bills will stay the same throughout the term of the agreement. If rates rise or fall, the changes don’t reflect on customers’ bills until contracts expire.
Pros of fixed rates:
- Offers stability for customers budgeting their energy costs
- Rates are protected from energy price increases and extreme weather events
- There is better predictability and more time to prepare for price changes
Cons of fixed rates:
- If energy market costs fall, customers must wait until their contracts expire to take advantage of lower prices
- Cancellation fees may apply
- Energy usage may boost costs in the long run
Variable Rates
Like fixed rates, variable prices are all-inclusive and set per Ccf, Mcf, kWh, or Therms price. However, variable prices can change at any time depending on your energy usage or market prices. For example, if the natural gas market prices increase, your utility bill may go up. If the market prices dip, so may your utility bill.
Pros of variable rates:
- Customers can take advantage of lower market prices
- Extreme temperatures or weather events may cause an increase in market prices
- Most variable rates don’t have cancellations fees
Cons of variable rates:
- Uncertainty with fluctuating natural gas rates
- Customers don’t have budgeting stability
- Customers often have to monitor the energy market and shop around for better rates
Can I Switch Natural Gas Plans?
If you’re not satisfied with the current natural gas plan that you’re on, you may have the option of switching to another one. Depending on the terms of your current plan. For example, if your fixed plan has a cancellation fee and you wish to switch to a variable plan, you have two options: You can wait until the end of your contract or you can pay the cancellation fee.
If you’re currently on a month-to-month variable plan and prefer cost stability, you can likely switch to a fixed plan at the end of your current billing cycle. Be aware that once you get locked into a fixed plan, you won’t have the flexibility afforded by a variable plan.
Choose a Natural Gas Plan That Works for You
Now that you’ve done your research on natural gas plans, what is your next step? Indra Energy is dedicated to providing convenient natural gas solutions to millions of customers. With over 100 years of combined experience, our team will work with you to find a suitable natural gas plan.
Contact us today to learn how your business can benefit from a suitable natural gas plan.
