Fixed vs Variable Electricity Rates: Which Saves More Money

During the 2024 polar vortex, some Ohio customers on variable rates saw their bills triple in a single month. Same house. Same usage. Just a different rate type.

That's the difference between fixed and variable.

Fixed-rate plans lock your price for the contract term—6 to 36 months. Market crashes? Doesn't matter. Market spikes? Doesn't matter. Your rate stays put.

Variable-rate plans change monthly based on wholesale prices. Sometimes you win. Sometimes you really don't.

Why does this matter? Because it affects how predictable your bills are—and whether you're protected when things go wrong. Hate surprises? Go fixed. Comfortable with risk? Variable works.

Fixed rates lock your price. Period.

Sign up for 6.5¢/kWh for 12 months. That rate stays the same whether wholesale prices crash or spike. Your bill only changes based on usage.

The upside: You know exactly what you're paying. Polar vortex hits and everyone else's variable rates go crazy? Yours stays put. Predictable bills.

The downside: Fixed rates usually start higher than today's variable rates. Suppliers bake in padding to protect themselves. You're also committed—leave early and you might pay $50-200 in termination fees.

Fixed works best if you'd rather have predictable bills than chase potentially lower prices.

Variable rates ride the market. Your rate adjusts monthly based on wholesale prices.

When things go your way, you save. Natural gas drops? Your rate drops. Lots of wind and solar? Prices fall. Mild weather? You win.

But it works both ways. Supply disruptions. Heat waves. Polar vortex. All of these spike your rate fast. Some people have seen variable rates double or triple in a single month. Not a typo.

Variable plans often hook you with attractive intro rates. But there's zero price protection. You're fully exposed.

The one advantage: Most variable plans let you cancel anytime without fees. Rates climbing? Jump to fixed. That flexibility matters.

Variable works best if you pay attention to markets and can handle the occasional ugly bill.

Truth: variable rates often average slightly lower than fixed over time. Fixed rates include a risk premium—suppliers pad the price to protect themselves.

But averages deceive. Variable saves you $5/month during normal periods. Then one bad month costs you $50 extra. One spike erases months of savings. The math turns fast.

Fixed eliminates that uncertainty. You trade the possibility of lower costs for the guarantee of stable ones.

Quick math: a 0.5¢/kWh difference works out to $60/year for typical usage. That's the real stakes.

The question: does chasing that potential savings justify the risk?

Fixed rates make sense when you want your electricity bill to be boring. That's a compliment.

Go fixed if:
- You prefer knowing what you'll pay for budgeting
- You want protection when markets go haywire (polar vortex, heat domes)
- Current fixed rates look decent compared to market
- You have zero interest in tracking energy prices
- You're on a tight budget where one high bill would hurt

Bottom line: fixed trades potential savings for guaranteed stability. For most households, stable bills beat chasing a few extra dollars.

Variable can work—for the right person.

Go variable if:
- You follow energy news and react quickly to price changes
- Wholesale prices are trending down (variable lets you benefit immediately)
- You're planning to move soon (no contract to escape)
- You have financial cushion to absorb occasional high bills
- You don't mind switching suppliers when conditions change

The biggest advantage: most variable plans let you leave anytime without fees. Prices climbing? Jump to fixed immediately.

Should you try to time the electricity market? Probably not.

The logic: markets volatile? Lock in longer fixed. Prices historically high? Go shorter while waiting for things to settle.

Reality check: timing energy markets is hard. Even experts get it wrong. If you've tried timing the stock market, you know how this goes.

Better approach: pick a medium-term fixed rate (12-24 months) and stop thinking about it. Set up rate monitoring for alerts when something significantly better comes along. Done.

The goal is a reasonable rate and moving on with your life. Not becoming an energy trading expert.

Beyond fixed and variable, you'll see other structures trying to blend both.

Indexed plans tie your rate to a benchmark (like utility standard service) then add/subtract a margin. Margin is locked. Base moves with market.

Hybrid plans mix approaches. Some give fixed rates during peak months (summer/winter), variable the rest. Others cap how high your variable can go—limiting downside while chasing low prices.

Renewable plans sometimes work differently—fixed electricity rates plus separate charges for renewable certificates.

These can make sense for specific situations. But they're more complicated than most people need. If you're considering one, read the contract carefully. Read the full contract.

Nobody likes reading contracts. But five minutes now saves nasty surprises later.

For fixed plans: Nail down the exact rate per kWh, contract length, early termination fee, and what happens when it ends. That last one trips people up—many plans auto-renew at much higher rates if you don't actively shop.

For variable plans: Understand how they calculate your rate monthly and how much notice they give. Some warn you 30 days out. Others surprise you on the bill.

Watch for hidden costs: Monthly service charges ($5-10 on top of advertised rate). Promotional periods that end after a few months and jump higher. Weird conditions.

Good news: reputable comparison sites show all fees and terms upfront. Compare true cost, not headline rate.

Simple version: pick based on how you live, not what looks cheapest today.

Want predictable bills? Don't want to think about electricity? Go fixed.

Comfortable with uncertainty? Want flexibility to chase savings? Variable can work.

Ask yourself: do you want to monitor energy markets and switch suppliers? Or set it and forget it? Most people don't want to actively manage their electricity supply. That's fine.

Whatever you decide, compare both options before committing. Look at multiple suppliers. That's the only way to know you're getting a fair deal.