The short version: a fixed-rate plan locks your energy price for the contract term (1, 2, 3, or 5 years are common). A variable plan moves with the market or with a defined index. Fixed plans give you predictability and a small premium for it. Variable plans give you market exposure — usually cheaper on average, occasionally painful.
The pitch that confuses people most
"Lock in today\'s low rate before it goes up." This pitch turns the decision into a horse-race guess about next month\'s wholesale price. That is the wrong frame. The right question is: what is the locked rate against the rolling RoLR average, and what risk am I being asked to pay for? A locked rate that is well above the trailing 24-month default-rate average is asking you to pay a big premium for certainty. A locked rate that is close to or below the trailing average may be a genuine deal.
Fixed vs variable, side by side
| Aspect | Fixed | Variable / Default |
|---|---|---|
| Rate during term | Locked | Moves with market or index |
| Typical premium over expected average | 10–25% (insurance cost) | None or small |
| Exit fee | Usually $50 to several hundred dollars | Usually none |
| Bill predictability | High | Low to moderate |
| When it wins | In years when prices spike | In stable or falling markets |
| Suited to | Tight budgets, risk-averse households | Households comfortable with monthly variation |
Tool: fixed contract break-even analyser
Enter the fixed rate you have been offered and the 12-month rolling RoLR average for your area. The tool returns the percent premium you are paying for certainty, and the implied "RoLR must average above this level" break-even.
The non-obvious thing about long-dated contracts
Five-year fixed contracts look attractive when the market is calm. But a five-year contract is also a five-year exit-fee risk. If wholesale prices fall sharply two years in, you are locked at a now-uncompetitive rate with hundreds of dollars in exit fees to break out. Most households end up paying for stability they did not need.
A 12- to 24-month fix usually gives most of the insurance benefit without the long lock. Shorter terms are more flexible and almost always available at competitive pricing.
What to actually do
- Look up the 12- and 24-month rolling RoLR average for your area. The UCA publishes the history.
- Get fixed quotes for 1, 2, and 3 year terms. Note the rate, admin fee, and exit fee for each.
- Use the break-even tool above to see what premium each quote represents.
- Pick the shortest term that gives you the protection you actually want.
- Calendar the contract expiry. The auto-rollover to a variable rate at term-end is where many savings disappear.
