Compare Electricity - Fixed Rate Plans

Opposite variable rate electricity plans are offers known as fixed rate plans. The advantage of a fixed rate plan is that the price, in terms of the base energy charge, is set and doesn't change for the length of the contract term, which can vary between as few as 3 months all the up to as many as 60 months.

So, anyone who signed a contract that carried them through the 2011 heat wave had no worries with regards to their electricity rate (the only remaining concern being rolling blackouts, which we can't control).

The primary attractiveness of the fixed rate electricity plan is the comfort in knowing what your rate is going to be each month and that you can control your final bill simply by keeping tabs on your energy usage (easier said than done).

Fixed rates can vary widely, but, in general, the longer the contract term the higher the rate. That may be due to electricity rates' tendency to follow the price of natural gas. Since that price is unpredictable and riskier the further one looks out into the future, a retailer would need to charge a premium rate for that volatility.

I tend to search specifically for rate offers of 6 and 12 months in length as that's where I've noticed consistently good prices from most reps.

Negatively, however, where variable rate plans are flexible in terms of switching electricity providers, the converse is true for fixed rate plans.  Switching your rep before the contract term has expired can lead to costly cancellation fees.

Typically, cancellation fees are higher with longer contract terms. As of this writing, those fees ranged from about $50 (3 month term) to as much as $450 (5 year term) and can be found in the "Disclosure Chart" section of the Energy Facts Label.

The reason for higher cancellation fees on longer contract terms? I think this is related to each rep's requirement to accurately forecast the energy needed to supply all of their respective customers. I imagine that any unexpected event which throws a wrench into those forecast models (like customers cancelling) are fairly costly from the rep's point-of-view.

Anyways, one example of cancellation fee verbiage, from Direct Energy, which I found really straightforward:

Not many questions there... you cancel before your 12 months are up, you pay $200.

Another example, this time from TXU Energy:

Same clarity in terms... notice that the fee is higher due to the longer, 24 month, contract term.

However, what if you were in the last few months, or month, of the contract and needed to cancel?  The flat cancellation fees would seem a bit harsh.  In that case, there are some offers that will pro-rate the fee for cancelling service, such as this example from Dynowatt:

After just 4 months, you could cancel this 12 month contract for $200, the same cost as the aforementioned Direct Energy example, which charges that much in any month that you cancel.

One last example, this time from Amigo Energy:

This is interesting since they allow you a reason to cancel without a fee:  For moving out.

Bottom-line, fixed rate plans are great if you want to "set-it-and-forget" and not have to chase the lowest variable rate each month.  Just remember to renew on another fixed rate plan, either with the same rep or by switching to a new one, as soon as the contract expires.  The default for all of the fixed rate plans that I've seen place the customer onto a variable rate month-to-month plan which can turn out to be an unpleasant surprise.