Which is better for me? A fixed-rate or a variable plan?

Finding the best energy plan for you will depend on several factors: Location, living situation, working life, budget, and values all come in to play when picking an energy plan.

In this article we are going to go through the pros and cons of a fixed-rate plan and a variable plan, as well as gives three scenarios and problem-solve to what the best plan would be.

Please note that you should always use a price comparison website and consult with providers before switching, as everybody’s situation is different.

So, why would I pick a variable rate plan? And why would I not pick a variable rate plan?

Pros Cons
  • No exit fees, change whenever you want
  • If prices fluctuate and are higher, you will have to pay the increased amount
  • If the pricing is cheap and goes down, you will save money too
  • Not as much choice from providers on plans
  • A lot cheaper than fixed-rate plans

 

So, why would I pick a fixed-rate plan? And why would I not pick a fixed-rate plan?

Pros Cons
  • Able to budget
  • Exit fees
  • Not affected by influx in price
  • If prices drop, you will still pay the original price
  • Variety of suppliers on the market
  • If you use less energy one year you will still pay the same
  • Security in a contract for a minimum of a year

 

Below are two scenarios which can be common when moving into a property, we have highlighted each scenario and advised on what the best option would be for each.

Scenario 1:

Living situation: Four graduates living in a rented shared accommodation on a 1-year lease

Working life: All four graduates are employed, but on entry-level salaries and spend evenings and weekends in the property

Budget: Two graduates are on a strict budget, whereas the other two have external support from family to pay for bills

Best plan: Fixed-rate

Why?: Fixed-rate plans usually last anywhere between 1-2 years depending on the plan you choose, and all four graduates are tied into a minimum 1-year lease, meaning they will all need to contribute or risk extra fees. With two of the graduates being on a stricter budget, and all four graduates regularly spending time in the property, it would be financially more feasible to opt into a fixed plan which is fair pricing for everybody.

 

Scenario 2:

Living situation: Couple living in rented accommodation, saving to buy a house, lease about to run out

Working life: Both work in jobs that require a lot of travel, spend every other weekend together in the flat

Budget: Financially strong and both motivated by green energy options

Best plan: Variable rate

Why?: With the couple saving to buy a house, and the lease on their rental property about to run out, a flexible plan would be best to not incur exit fees and to have fluidity with their energy provider. This couple is also financially strong so a slight fluctuation in price will not affect them too much, especially as they spend more time traveling for work than in the house.

We hope this blog and scenarios have helped you to make a more informed decision on a plan, and make sure to always use a price comparison website.

Author: Claire Stapley
Claire Stapley is ElectricityComparison.com.au's Energy Editor, based in Melbourne Australia. Claire is a founding member of ElectricityComparison.com.au News and Energy Team.