Variable electric rates, unlike fixed electric rates, float up and down with the price of the energy market. Electricity, just like the stock market, is a financial product that changes in price regularly. Most homeowners and businesses elect to purchase a fixed rate so that they can control their budgets, but there are many advantages to a variable rate.
Some energy suppliers offer variable rates that are calculated by taking the average price of the market and adding the energy company’s margin to the price. These rates truly follow the market each month and can be beneficial when market prices are low. When the market is high, however, these types of electricity prices can cost you lots of money.
Other types of variable rates that do not have any sort of basis or calculation in the contract are left up to the discretion of the energy supplier. Many times, after a fixed contract expires, energy suppliers will put customers on these types of rates, providing they do not switch away. These variable prices are notorious for being very high – sometimes even double the price of the market. We advise all customers to avoid these types of variable prices.
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