Make an Informed Decision: How to Find the Right Energy Plan for You
Finding the right natural gas or electricity plan for your home or business can be a complicated process. While you can always just pick the lowest rate you see without reading the fine print, you could end up kicking yourself in the long run when that fine print catches up to you. Instead of urging you to pick the first energy plan that pops up, at SaveOnEnergy.com®, we suggest you do your homework by taking a look at the main components of energy plans. That way you can make an informed decision and sleep soundly, knowing that your money is being spent fairly.
A deeper look at rates
In addition to the regulated utility fees you have no control over, you will also be paying fees for your energy supply. Energy supply rates are offered by a variety of suppliers and come in various forms, each with their own benefit for a different type of customer.
In general, most supply rates are tied to changes or predictions of the often-changing price of energy. It's important to assess what kind of supply rate would work best for your home's or business' monthly budget before shopping for plans. Let's take a deeper look at the supply rates you will typically come across when looking at plans.
- Fixed-rate plans or stable-rate plans allow customers to secure a set rate per kWh for the duration of the contractual agreement. These rates do not change, regardless of market highs and lows. However, depending on the terms and conditions in your contract, there may be extreme exceptions that could change your set rate. Fixed-rate plans may sometimes seem like a higher rate than you're used to but when you take into account the stability, you could end up saving money, or pay more, depending upon the state of the energy market throughout the course of your contract.
- Variable-rate plans generally follow the spot market value of electricity or natural gas. These fluctuating rates can allow customers to take advantage of market lows. On the other hand, consumers with a variable supply rate must also be prepared for rate hikes during periods of high demand. Make sure to read all of the details of a variable-rate contract to be sure your budget is adjusted to accommodate these dynamic rates.
- Indexed rates are a little more complex. These supply rates, like varaible rates, can fluctuate over time. Unlike variable rates, the fluctuating supply rates of indexed plans follow a mathematical formula tied to a commodity index. Before signing up for an indexed-rate plan, be sure to understand the formula it follows so you can be sure your budget is comfortable with the varying prices.
- Time-of-use plans are offered by some suppliers. These plans offer customers different rates at different times of the day or week or are even free during designated periods. The perk of having time-of-use plans is you can sometimes cut down costs by doing energy-intensive chores, such as laundry, during the designated free or cheaper hours, usually at night or on the weekends.
- Flat-rate plans allow the customer to pay the same price each month for their electricity or natural gas supply. Plans such as these may require a customer's usage history to make an accurate determination of the plan price. It is also possible, depending on your plan's terms and conditions, that you could be charged for going over an allotted usage.
Choosing the length of your term
Many things go into deciding what energy plan timeframe will be best for you. For instance, if you're a renter, you may want to choose a term that corresponds with the length of your lease, but if you're a seasoned homeowner, you may want price protection with a fixed-rate plan for multiple years. To better understand term options, take a look at some of the most popular term lengths by rate type.
Being in a fixed-rate contract means having price security. As energy prices go up, your supply rate remains the same. Of course, if energy prices go down, your supply rate still stays the same. The following timeframes are intended to come with the agreed-upon price for the entire length of the term.
- Multi-year plans are a great fit for a homeowner or renter who prefers price security long-term. While the energy market fluctuates over the next two, three, or even five years, it will be of no concern to customers in a long-term fixed-rate plan. On top of that, customers with these plans have the peace of mind of not having to shop around 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 typical 12 months.
- Shorter terms such as six- or three-month fixed-rate plans are available from some suppliers. These terms may be a good fit for consumers who want to lock in a supply rate for a short period of time because of the season or if they have a short lease.
Variable- and indexed-rate terms:
Considering that variable and indexed rates fluctuate, most suppliers offer these plans in shorter terms. Variable- and indexed-rate plans are a great fit for consumers who are market savvy or simply prefer absolute flexibility - from their rates to their term.
- Month to month is the most popular option for variable- and indexed-rate plans. Part of the perk of month-to-month plans is the freedom of switching plans but customers must be prepared for supply rate fluctuations from bill to bill.
- Prepaid plans are a good fit for folks who run on a tight budget. These plans allow you to pay for your supply rate before you use it. However, if your supply bank runs out, so will your electricity or natural gas. Also keep in mind that certain customers may not qualify for prepaid. For example, in Texas, if a resident in your home requires electric medical equipment such as a ventilator, you cannot have a prepaid plan.
Additional options to consider
Once you've nailed down the type of supply rate you'd like and the term length, you're almost done with your homework. The final step is assessing additional options to make sure you have a comprehensive understanding of incentives available to you.
- Green energy plans allow customers to offset their home's or business' carbon footprint via the purchase of renewable energy on their behalf. These plans vary and can offset up to 100% of a consumer's energy use in green energy. If you're an eco-conscious consumer or advocate for a transition to renewable energy, green energy plans may be a good option for you.
- Smart thermostats come free with specified energy plans and are a great way to cut costs through conservation. These devices can program themselves, adjusting to your schedule and saving you on heating or cooling costs when you're not home or sleeping.
- Service protection plans can be added to your plan by certain suppliers. These plans typically supplement home insurance by covering items such as appliances and HVAC systems. For instance, if a customer with a service protection plan has his or her oven break, repairs would be covered by his or her service protection plan.