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All About Energy

Fixed Rate or Index Rate: Which is Best for Your Energy Plan?

Incite Energy Oct 6, 2016 8:00:00 AM
Incite Energy
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chess.jpgShould you pay a fixed rate for electricity, or take your chances with market prices? If you're choosing a new plan for your company or home, you'll need to weigh these options.

While index plans can give you the lowest rates, there's also the risk that price spikes will catch you off guard.

Fixed pricing locks you into a specified rate for the duration of your agreement. It may not offer the lowest possible rate, but it will give your business certainty. 

Before you can make an informed decision, there's more you need to know.

Index Plans

When you choose an index plan, your rate will fluctuate with the market each month. The main benefit of an index plan is that if the market price decreases, your bill will shrink along with it. In areas that experience extreme heat or cold, however, the price per kWh may increase dramatically, jacking up your rate.

Many businesses can save money with this option, and there's no cancellation fee if you decide to switch plans or providers. Bear in mind, though, that the uncertainty can also make it difficult for some companies to budget for their monthly energy costs.  

 

Fixed Plans

Fixed rate plans set a price per kWh for a minimum of three billing cycles, or a contract term. This option streamlines the quote process and minimizes risk; you can relax knowing that your rate won't change, no matter what happens in the market. The fixed rate also makes it easier to budget for your energy bill. However, the provider will build contingency into the quote to protect itself, so you'll end up paying a higher average cost. 

 

Should I choose a fixed rate or index plan for my electricity?

Each type of energy plan offers unique benefits, and what works for one company may not work for you. Be sure to research how you can get the most out of your electric rate. If you're still unsure, we can help you analyze your company's needs and get you on track. Once you've decided on a plan, make sure you read the fine print of your contract before you sign up with a new supplier.

 

Avoid high

 

Topics: energy rates