Understanding energy plans: Fixed vs variable, peak pricing and more

Understanding energy plans: How to choose the right option for your home

When it comes to managing your household bills, understanding your energy plan is one of the easiest ways to start saving money. But with so many plans, tariffs, and terms thrown around, it can feel overwhelming. This guide breaks it all down for you.

In this article, you’ll learn:

• The difference between fixed and variable rate energy plans

• What peak and off-peak pricing really means

• How to navigate contract terms and exit fees

• What to watch out for when comparing providers

Let’s dive into how to decode your energy plan and make sure you’re getting the best deal.

Fixed vs variable rate energy plans

One of the first decisions you’ll face when comparing energy plans is whether to choose a fixed or variable rate.

Fixed Rate Plans
These plans lock in your energy usage rate (cents per kWh) for a set period, usually 12 to 24 months. This provides price certainty, especially if energy prices are expected to rise. However, if rates drop during your contract period, you won’t benefit from the lower prices.

Variable Rate Plans
With a variable plan, your energy rates can change at the discretion of the retailer. This means you could save if market prices fall, but you also risk paying more if prices rise.

Which is better?
If you value stability and budgeting predictability, a fixed plan may be ideal. If you prefer flexibility and are willing to follow market trends, a variable plan could work for you.

Peak and off-peak pricing: Time-of-use tariffs explained

Time-of-use tariffs charge different rates depending on when you use electricity. They can help reduce costs if your household can shift usage to cheaper times of the day.

Here is a general breakdown of time-of-use pricing:

• Peak hours (e.g. 4pm to 9pm weekdays): Most expensive

• Shoulder hours (before and after peak): Mid-range pricing

• Off-peak hours (late night and early morning): Cheapest

Running appliances such as dishwashers, washing machines, or electric vehicle chargers during off-peak times can reduce your bill.

Tip: Check your meter type. Not all households are eligible for time-of-use pricing unless a smart meter is installed.

Contract terms: Short vs long-term agreements

Energy retailers offer various contract lengths. Some plans are month-to-month, while others extend for more than two years.

Short-term contracts offer flexibility, which is useful if you are renting or may move soon. Long-term contracts may offer incentives such as sign-up credits or usage discounts, but they can include exit fees if you cancel early.

Always check the terms carefully, especially:

• Whether prices can change during the contract

• Renewal conditions

• The cooling-off period (usually 10 business days in Australia)

Exit fees: What happens if you switch?

Although many plans now promote no lock-in contracts, some still include exit fees if you leave before the contract ends. These fees can range from $20 to over $100.

Before signing up, ask the following:

• Is there a termination fee?

• Will I lose any discounts or rewards if I cancel early?

• What is the switching process?

The good news is that Australia’s energy market is highly competitive. Switching providers is usually simple and can often result in better rates.

What to look for when comparing energy plans

When comparing providers on EnergyPlans.com.au, make sure to consider the following:

• Usage and supply rates: These are the charges you pay per kilowatt hour and per day

• Plan conditions: Look for discounts, bill credits or bonus offers

• Solar feed-in tariffs: Important if you have solar panels installed

• Green energy options: Some plans offer 100 percent renewable energy or carbon offsets

• Customer service: Research provider reviews and support quality

Final thoughts

Understanding your energy plan is a key step in taking control of your household costs. By knowing the difference between fixed and variable rates, monitoring exit fees, and comparing offers side-by-side, you can make smarter energy choices that better suit your lifestyle.

Ready to compare energy plans?

Use our free energy comparison tool to instantly review plans and pricing from trusted Australian retailers. It takes just a few minutes and could help you save hundreds per year.

Visit EnergyPlans.com.au to get started.