Deregulated electricity rates explained
If you live in a state with a deregulated energy market, you have the freedom to choose your electricity provider rather than having to rely on your local utility. Because this type of market creates competition among energy providers, customers will likely have a range of plan types and rates to choose from to meet their usage and budget needs. However, understanding the basics of deregulated electricity rates is important because the type of energy rate you select will determine the price you pay for electricity.
The two most common types of electricity rates are fixed and variable.
Fixed rate
A fixed rate is the most common rate type you’ll encounter in a deregulated market. This type “fixes,” or locks in, one electricity price for the duration of your contract. A fixed-rate plan is ideal for shoppers who want predictable energy bills and protection from price fluctuations in the energy market.
One downside to this type of rate is that you must sign a contract to lock in your rate. Energy contracts typically last one to three years, but shorter options like six- or eight-month contracts are sometimes available. You may incur an early termination fee (ETF) if you cancel your plan before its term is up, unless you’re moving outside the provider’s service area.
Variable rate
Variable rates are connected to the wholesale cost of energy, meaning your rate will fluctuate with the market. Because of this variation, you can expect to have a different price on your energy bill from month to month.
The benefit of this type of rate is that it typically doesn’t require a contract, giving you maximum flexibility. This option may be a good choice for individuals seeking a temporary energy solution. However, keep in mind that a variable-rate plan can be risky due to fluctuations in the energy market. When demand and prices rise, so can your energy rate.
Compare electricity rates in your area
You can secure a low rate on the Choose Energy marketplace if you live in one of the following deregulated states:
Shop affordable electricity rates on Choose Energy
Choose Energy makes it easy to explore your options, compare rates, and sign up for a new energy plan today. Here’s how shopping for electricity on our marketplace works:
- Enter your ZIP code: When you enter your ZIP code on this page, we’ll provide a list of available providers and plans in your area. Filter your results for specific features, providers, and term lengths.
- Select a plan: Once you find a rate that fits comfortably within your budget, you can sign up in minutes. If you need extra guidance, call the number on your screen, and one of our agents will assist you.
- Enjoy your service: Your new provider will handle activating your service, and you shouldn’t experience any power interruptions.
Frequently asked questions about electricity rates
What is a good electricity rate?
Electricity rates vary by location and provider. According to the Energy Information Administration (EIA), the average residential electricity rate is 18.07 cents per kilowatt-hour (kWh). However, you may be able to find a cheaper rate on Choose Energy — simply enter your ZIP code to explore your options.
When are the lowest electricity rates available?
The cost of energy fluctuates throughout the year, primarily due to weather conditions and the resulting demand for electricity. For example, summer and winter tend to be more expensive because people use more energy during these seasons to combat more extreme temperatures. On the other hand, spring and fall are usually cheaper because the weather is more moderate, resulting in lower electricity demand.
Is a fixed rate or a variable rate better?
The best electricity rate type depends on which one matches your lifestyle. A fixed rate is best suited for someone who can commit to a contract and wants stability. However, a variable rate is preferable if you want flexibility.