Picking Which Energy Plan is Best for You

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How to choose the right electricity plan

If you live in an area with a deregulated energy market, you can choose your energy plan from several electric companies in their area. While deregulation provides more flexibility, it may also make finding the best electricity plan feel like a complicated process. You may be tempted to choose a plan with the cheapest rate, but there are other factors to consider.

SaveOnEnergy can help you determine how to choose the right electricity plan based on your specific needs. Use the information on this page to make an informed decision about which home electricity plan is right for you.

What electricity plan should I use?

Power companies typically offer a few types of energy plans, which can impact the electricity rate you ultimately pay each month. Each type of energy plan comes with its own set of benefits and drawbacks.

The following are the most common types of plans you’ll find when shopping for the best power plans. When thinking about which energy plan is best, consider whether the plan will match your budget and needs.

Fixed-rate plans

Best for: residents who value predictable bills and don’t mind entering into a contract.

Sometimes called stable-rate plans, fixed-rate options let customers lock in a set rate per kilowatt-hour (kWh) for the entirety of the contract. The electricity rate you pay doesn’t change, regardless of market conditions and the wholesale cost of energy. Because the rate you pay stays the same, fixed-rate plans normally result in more predictable electric bills. 

If you’re able to shop for a plan when rates are low, you could end up securing a cheap electricity rate for a long time. However, if you’re searching for an energy plan when there’s high demand, a fixed-rate plan could mean you’re locked into paying more. Consider the average electricity rate in your area before signing up for a plan.

Fixed-rate plans also require you to sign a contract. If you cancel your contract before it expires, your provider will charge an early termination fee (ETF). However, if you cancel your service because you’re moving to an unserviceable address, your provider will not charge an ETF. 

Variable-rate plans

Best for: residents who will monitor the market and switch plans if wholesale prices spike.

Variable-rate plans do not require a contract, meaning you can switch to another plan or provider anytime. However, the energy price you pay with a variable-rate plan is based on the market rate of electricity. This means variable-rate plans offer more flexibility, but some risk is associated with this type of plan.

The wholesale cost of energy depends on supply and demand, as well as factors like the weather. Fluctuating rates can allow customers to take advantage of market lows. However, residents with a variable-rate plan should also be prepared for rate spikes during times of high demand. Make sure to review a plan’s Electricity Facts Label (EFL) before signing up.

Prepaid energy plans

Best for: residents with a tight budget or lower credit score.

Prepaid plans are a type of month-to-month energy plan where you pay for electricity upfront. This ensures you only pay for the amount of energy you use every month. If the funds in your account run low, your provider will send you a reminder to add more. 

Like variable-rate plans, prepaid plans don’t require a contract, giving you flexibility to switch plans at any point. You also won’t have to undergo a credit check or pay a deposit with this type of plan. The flip side to prepaid energy plans is that they sometimes have a higher rate. The price you pay is determined by the market cost of electricity, so prepaid plans come with some risks. 

Other types of energy plans

• Indexed-rate plans. With this type of plan, the rate you pay may fluctuate over time, like it would with a variable-rate plan. Unlike variable-rate plans, the rate you pay with an indexed-rate plan is based on a mathematical formula tied to a commodity index. Before signing up for an indexed-rate plan, be sure to understand the formula it follows. The plan’s EFL should outline all the details.
• Time-of-use plans. Some providers offer time-of-use plans, which charge different rates depending on the time of day or week. The perk of having time-of-use plans is that you can sometimes cut down costs by doing energy-intensive chores, such as laundry, during free or cheaper hours, usually at night or on the weekends.
• Flat-rate plans. A flat-rate plan allows customers to pay the same rate each month for their electricity or natural gas usage. These plans may require a customer’s usage history to make an accurate determination of the plan price, which is an average price determined over a certain period of time. It is also possible, depending on your plan’s terms and conditions, that you could be charged for going over an allotted usage.

How long do energy contracts last?

Some types of energy plans — like fixed-rate plans — require you to sign a contract. Energy contracts typically last between 12 and 36 months, although there may be shorter contract options available depending on the provider. If you’re a renter, consider a contract that aligns with your lease. If you own your home, you may want price protection with a fixed-rate plan that lasts multiple years.

• Multi-year plans are a great fit for a homeowner or renter who prefers long-term price stability. While the energy market fluctuates over the next two or three, it will be of no concern to customers in a long-term fixed-rate plan. Also, customers with multi-year plans have peace of mind from not having to shop for a new energy plan for a while.
• 12-month plans are a good solution for people who prefer price protection for a full year. This term length is also a great fit for renters who aren’t sure if they will renew their lease at the end of the 12 months.
• Shorter-term plans, such as three- or six-month fixed-rate plans, are available from some energy suppliers. These terms may be a good fit for consumers who want to secure a supply rate for a short period of time because of the season or if they have a short lease. It can be easier to avoid ETFs with a shorter-term plan.

Renewable energy plans

If you’re trying to become more environmentally conscious, a renewable energy plan may be the best power plan for you. Renewable energy plans are powered by green energy sources like solar or wind. The exact percentage of green energy included in the mix will depend on the specific plan and whether your state has specified a required amount for every plan. 

Some providers specialize in 100% renewable energy plans, like Green Mountain Energy and Gexa Energy. Consider choosing a plan from one of these providers if the renewable energy content is an important factor to you.

Which type of energy plan is best for me?

Ultimately, choosing the best energy plan depends on your priorities and goals. If you want to lock in a single rate, you should search for fixed-rate plans. If you’re comfortable with the possibility of rates fluctuating, a variable-rate plan could be a good fit. 

Also, consider the term length and check whether a provider charges an ETF before signing a contract. While you won’t have to pay an ETF if you cancel because you’re moving, finding an energy plan with a term length that works for you is the safest bet.

When shopping for plans, it’s enticing to sign up for the plan offering the cheapest rate. However, keep in mind that usage tiers, bill credits, and other factors could impact the actual rate the provider charges each month. For this reason, we recommend thoroughly reviewing a plan’s EFL before making your decision. The EFL includes important information like factors that could impact the rate, the renewable energy percentage, term length, and more.