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Is electricity a fixed cost?
Picking an electricity plan is quite similar to picking a home loan, in the sense that they can offer fixed or variable rates. However, while there is usually an option to fix electricity rates, more often than not electricity is not a fixed cost. The majority of electricity plans in the market come with variable rates, but there are still a few electricity retailers that offer the security of a fixed rate electricity plan.
What is a fixed rate electricity plan?
A fixed electricity rate plan is an agreement whereby your electricity provider will not change the rates it charges you for power over a set period of time, usually one or two years. By guaranteeing today’s rates on electricity for one or two years, customers are protected from any electricity price changes (often rises) and are afforded a bit more certainty when budgeting ahead.
Unlike most other market offers, fixed rate contracts generally don’t include conditional discounts for paying bills on time, or via direct debit (although there are exceptions). Though there are over 30 electricity retailers in Australia, only a handful offer fixed rate electricity deals, and some may not be available in all areas.
- Fixed rate electricity plans are not to be confused with fixed cost energy plans, whereby customers pay the same amount every billing period.
What is a variable rate electricity plan?
Variable rate plans are the standard type of energy deal and are offered by almost all retailers. On a variable rate plan, the electricity company is free to change the rates it charges you at any time, provided it gives you notice. However, prices are typically only changed every six or 12 months – in January or July depending on where you live. Though that’s not to say electricity retailers won’t change their prices outside of these times.
Getting the best deal with variable rates will usually require ongoing homework as incentives are regularly changed and providers become more or less competitive very quickly.
The challenge for consumers is to decide whether there is better long-term value in fixing electricity prices, or staying with variable rates in the hope they don’t increase too much. Canstar Blue’s research shows that taking a gamble on fixed rates could be a smart move – not least because they can already work out cheaper than variable rate offers in the short as well as long-term.
Fixed vs variable electricity plans in Australia
Fixed rate electricity plans tend to fluctuate. When the wholesale electricity market is difficult to predict, the retailers have a habit of removing their fixed rate products given the uncertainty.
At the time of writing, EnergyAustralia, Amber Electric and Red Energy offer fixed rate plans in some areas – the fixed plans could even work out cheaper than the variable rate deals. Just keep in mind that Canstar Blue are only comparing products from two energy providers, and there may be cheaper fixed or variable rate deals available in your area.
Fixed vs Variable Rates New South Wales
EnergyAustralia and Red Energy offer fixed rate plans to New South Wales customers. To see if these deals are worthwhile, Canstar Blue once again calculated the average fixed rate cost over a year compared to the average variable rate prices (based on the cheapest fixed and variable rate deals from each provider).
| Average Fixed Rate Cost | Average Variable Rate Cost |
|---|---|
| $1,138 | $1,165 |
*Annual costs based on plans from EnergyAustralia and Origin. Price assumes general energy usage of 3900kWh/year. Estimated price includes any conditions discounts that may be available. Pricing based on Ausgrid network in Sydney for a residential customer on a single rate tariff, but prices will differ between distribution areas. April 2022.
In New South Wales, the average fixed rate price again comes out cheaper than the average variable rate deal. So why wouldn’t you lock-in rates now? It does seem strange that the retailers are making their fixed rate offers more competitive than their variable rate deals at the moment – but then, this is the energy industry we’re talking about.
Fixed vs Variable Rates VIC
When it comes to Victoria, we’ve compared fixed rate plans from EnergyAustralia and Origin to work which contract type is cheapest. This is how some fixed prices compare to variable rates in Victoria. Again, we’ve calculated the averages from these two providers’ cheapest fixed and variable rate plans.
| Average Fixed Rate Cost | Average Variable Rate Cost |
|---|---|
| $1,158 | $1,153 |
*Annual costs based on plans from EnergyAustralia and Origin. Price assumes general energy usage of 4000kWh/year. Estimated price includes any conditions discounts that may be available. Pricing based on Citipower network in Melbourne for a residential customer on a single rate tariff, but prices will differ between distribution areas. April 2022.
This time, we see that the fixed rate plans from EnergyAustralia and Origin currently work out a little more expensive than these providers’ variable rate counterparts. That being said, there is only a small margin in price between the two, and locking in rates for a year or two may provide Victorians with some peace of mind.
Fixed vs Variable Rates QLD
EnergyAustralia and Origin both offer fixed rate energy plans in Queensland. To see if a fixed rate plan can help you save some money, Canstar Blue has calculated the average fixed and variable rate prices from these two retailers. Given that these retailers often have multiple variable and fixed rate deals, we have compared their cheapest fixed and variable rate offers at the time of publication.
| Average Fixed Rate Cost | Average Variable Rate Cost |
|---|---|
| $1,263 | $1,265 |
*Annual costs based on plans from EnergyAustralia and Origin. Price assumes general energy usage of 4600kWh/year. Estimated price includes any conditions discounts that may be available. Pricing based on Energex network in Brisbane for a residential customer on a single rate tariff, but prices will differ between distribution areas. April 2022.
So, what do the retailers know that we don’t? In Queensland, we see that the average fixed rate plan from these two big providers is marginally cheaper than the average variable rate offer. When you consider that variable rate plans are likely – it would seem – to rise in the coming six to 12 months, going for fixed rates now seems to be a no-brainer.
Fixed vs Variable Rates SA
South Australians pay more for electricity than anyone else in the country, so does a fixed rate energy plan offer any escape? EnergyAustralia and Origin currently offer fixed rates in SA and this is how average prices compare to the variable rate average (using their cheapest fixed and variable rate plans).
| Average Fixed Rate Cost | Average Variable Rate Cost |
|---|---|
| $1,545 | $1,549 |
*Annual costs based on plans from EnergyAustralia and Origin. Price assumes general energy usage of 4000kWh/year. Estimated price includes any conditions discounts that may be available. Pricing based on SA Power network in Adelaide for a residential customer on a single rate tariff, but prices will differ between distribution areas. April 2022.
The difference between average fixed and variable rates in South Australia again suggests that locking in now could be worthwhile! It seems unlikely that variable rate plans are going to become significantly cheaper any time soon, after all!
Fixed or variable: Which type of plan is better?
In a nutshell, fixed rate energy deals are likely to prove a good bet in most cases, giving consumers a little more certainty over what they can expect to pay, certainly compared to variable rate plans. And given that many fixed rate products are already cheaper than variable options, locking in competitive prices now seems like a smart move. As long as they are competitive – not all of them are. However, as mentioned before, there is no guaranteed right or wrong answer in any state – it’s impossible to predict whether fixed or variable rates will work out cheaper in the long run.
It should be noted that the average variable rates provided are those from the same providers that offer fixed rate plans. Other energy companies may offer cheaper variable rate deals. At the end of the day, the decision between fixed or variable rates could depend on what type of energy customer you are:
- You may want to choose a fixed rate plan if you don’t like the idea of regularly switching electricity providers and prefer a ‘set and forget’ approach to energy. Fixed rate contracts are likely to work out cheaper than sticking with a variable rate deal where the conditional discount has expired. Again, just be mindful that rates are usually only fixed for a benefit period of 12 or 24 months, so be sure to check in from time to time.
- You may want to choose a variable rate plan if you are happy to frequently change energy providers to find the best deal on electricity. Chasing the cheapest variable rates may prove the cheapest bet.
Like with any financial decision, tunnel-vision is your worst enemy when shopping around for the best deal on electricity. Make sure you understand your electricity usage and have considered your energy needs in the future.
Compare Electricity Plans
Below you’ll find some of the cheapest electricity deals available on our database. Keep in mind that these plans may be a mixture of both fixed and variable rate products. Always read the energy price fact sheets before signing up.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Ausgrid network in Sydney but prices may vary depending on your circumstances. This comparison assumes general energy usage of 3911kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Citipower network in Melbourne but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Energex network in Brisbane but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4613kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the SA Power network in Adelaide but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4011kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
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