A fixed rate energy plan means you lock in the price you pay per unit of electricity or natural gas — cents per kilowatt-hour for power, or per therm or hundred cubic feet for gas — for the entire length of your contract. Sign a 12-month plan at 12 cents per kWh and that supply rate holds whether wholesale prices double next winter or drop over the summer. What the rate does not do is freeze your bill. Your bill still moves with how much energy you use and with delivery charges your local utility controls.
What the Fixed Rate Actually Covers
The locked-in price applies only to the supply portion of your bill. Supply is the cost of the actual electricity generated or gas purchased on your behalf. Whatever rate you agreed to at signing holds for the contract term, regardless of seasonal demand swings or spikes in the wholesale market.1U.S. Energy Information Administration. Electricity Explained: Factors Affecting Electricity Prices
Your total monthly bill includes more than supply. The delivery charge covers transmission and distribution — the infrastructure that physically moves electricity from the power plant to your home. Your local utility sets those delivery fees, and they can change based on infrastructure investments and regulatory decisions. Taxes and surcharges pile on top.
This is where people get tripped up. A fixed rate plan is not a fixed bill. Run the air conditioner harder in August and the bill goes up. The delivery portion fluctuates outside your retailer’s control. The “fixed” part is the per-unit commodity price and nothing more.
How Retailers Hold the Price
When a retail energy provider offers you 12 or 24 months at a set rate, they take on the risk that wholesale prices will rise above what they’re charging you. They manage that risk by purchasing energy futures or forward contracts on the wholesale market, locking in the cost of the commodity they’ll need to supply your account. That locked-in wholesale cost, plus the retailer’s margin, becomes your supply rate.
Longer contracts don’t always mean better prices. A retailer hedging 36 months out faces more uncertainty than one hedging 12, and that extra risk often gets baked into a slightly higher rate. The best contract length depends on where wholesale prices sit when you’re shopping and which direction the market expects them to move.
Pass-Through Charges That Can Change a “Fixed” Price
Some fixed rate contracts include language allowing the retailer to pass through certain cost increases that weren’t anticipated when the contract was written. These usually aren’t changes to the commodity price itself but shifts in transmission capacity charges, grid reliability fees, or costs triggered by regulatory changes. If an independent system operator changes its pricing formula, that added cost can land on your bill even though you signed a fixed rate plan.
Not every plan works this way. Some retailers offer what the industry calls a “super fixed” or “all-in” product that prohibits any pass-through adjustments. These plans carry a higher rate upfront because the retailer is absorbing that risk rather than sharing it with you. When comparing plans, the contract language around regulatory changes and cost adjustments matters as much as the headline rate.
Fixed vs. Variable: What You’re Actually Buying
The alternative is a variable rate plan. Instead of a locked-in price, your rate floats month to month based on wholesale market conditions. When demand is low and commodity prices are cheap, variable customers pay less. During a brutal cold snap or heat wave, they can pay dramatically more. Fixed rate customers don’t ride that roller coaster.
The trade-off is straightforward: certainty costs something. During sustained periods of low wholesale prices, a fixed rate customer is likely overpaying compared with a variable plan. They’re also protected from months where variable prices spike 200% or more. For household budgeting, that predictability has real value. You know what the supply portion of your bill will be per kWh every month, which makes planning easier.
Variable plans make sense for people who actively monitor energy markets and are comfortable absorbing occasional price shocks. Fixed plans are for everyone else. Most households choosing fixed plans are buying peace of mind more than they’re optimizing cost.
Where Fixed Rate Plans Are Available
Fixed rate plans only exist in deregulated energy markets, where state law lets you choose your retail electricity or gas supplier. About 13 states plus Washington, D.C. currently offer residential retail energy choice. If you live in a regulated market, your local utility handles both supply and delivery, and there is no rate to shop for.
Rules vary within deregulated states too. Some states deregulated electricity but not natural gas, or vice versa. Some allow choice only for commercial customers. In every deregulated market, your local utility still owns the delivery infrastructure. Switching providers changes who supplies your energy and at what rate. It does not change who maintains the wires and pipes or who shows up during an outage.
Fees Beyond the Advertised Rate
The headline rate on a fixed plan isn’t always the full picture. Several fees can inflate your actual cost, and they’re easy to overlook when you’re comparing plans on the per-kWh number alone.
Base Charges
Some plans include a flat monthly fee regardless of how much energy you use. These base charges typically run $5 to $20 per month and cover the retailer’s administrative costs like billing and customer service. A plan advertising 10 cents per kWh with a $15 base charge costs more than a plan at 11 cents with no base charge if your usage is low enough. Factor base charges into your total expected monthly cost.
Minimum Usage Fees
Some providers add a fee when your consumption falls below a set threshold. If a plan sets an 800 kWh minimum and you only use 500 kWh, you might get hit with an extra $10 charge. These fees disproportionately affect small apartments, single-person households, and homes with solar panels where grid consumption is naturally low. Check the plan disclosure documents before signing.
Introductory Teaser Rates
Some advertised rates only apply under narrow conditions, like using an exact amount of power, or they last only for the first billing cycle before reverting to a higher price. A straightforward fixed rate plan charges the same per-kWh price whether you use 500 or 2,000 kWh. If the price at different usage levels looks wildly different in the disclosure chart, that’s a teaser setup rather than a true fixed rate. Watch for “introductory” or “promotional” in plan descriptions.
Contract Terms That Matter
Fixed rate contracts typically run 6, 12, 24, or 36 months. Contract length affects not just your rate but the penalties and procedures for ending the agreement. Three provisions deserve close attention before you sign.
Early Termination Fees
If you cancel before the contract expires, most providers charge an early termination fee (ETF). These are structured either as a flat fee or a per-month penalty for the remaining term. Flat fees commonly range from $150 for a 12-month plan to $200–$395 for longer contracts. Per-month penalties typically run around $20 for each month left on the agreement. On a 24-month plan cancelled halfway through, a $20 per-month ETF would cost you $240. Check which structure your contract uses before signing, because it determines how expensive leaving early gets.
Automatic Renewal
Many contracts include an automatic renewal clause that kicks in if you don’t take action before the term ends. The renewal terms are almost never as favorable as your original deal. You might roll into a new fixed rate at a higher price, or default onto a month-to-month variable rate. Either way, you lose the rate you originally negotiated without actively choosing what comes next.2Retail Energy Advancement League. Watts That? Multi-Year Contracts – Section: Automatic Renewal
Notice Periods
To avoid automatic renewal, you typically need to notify your provider within a specific window before the contract’s end date. This notice period commonly ranges from 30 to 60 days. Miss it by a day and you could be locked into new terms you didn’t agree to. Set a calendar reminder at least 90 days before your contract expires so you have time to shop alternatives and submit cancellation within the required window.2Retail Energy Advancement League. Watts That? Multi-Year Contracts – Section: Automatic Renewal
Your Right to Cancel After Signing
If you sign up for a fixed rate plan and immediately regret it, you may have a short window to cancel without penalty. Many deregulated states require energy retailers to offer a rescission period, typically 3 to 7 days for residential customers, during which you can walk away with no fees and no obligations. The exact length and how the days are counted (calendar days, business days, or excluding weekends and holidays) varies by state.
For contracts signed with a door-to-door energy salesperson at your home, the federal cooling-off rule provides an additional safety net. Sellers must disclose your right to cancel within three business days of the transaction for sales valued over $25.3Federal Trade Commission. Cooling-off Period for Sales Made at Home or Other Locations
Door-to-door energy sales are common in deregulated markets, and high-pressure tactics can lead to quick sign-ups that don’t hold up under scrutiny. If you signed at your door and want out, act within those first three business days. After the rescission window closes, your only exit is paying the early termination fee.
How to Compare Fixed Rate Plans
Shopping on the headline per-kWh number alone is the most common mistake in deregulated markets. Two plans advertising the same rate can cost you very different amounts depending on their fee structures. A better approach:
- Calculate your total monthly cost. Multiply the per-kWh rate by your typical monthly usage, then add any base charge or fees. Compare that total across plans, not just the rate.
- Check for minimum usage fees. If you’re a low-usage household, a plan with no usage floor might save you more than a plan with a lower rate but a threshold.
- Read the contract language on pass-throughs. Look for clauses about regulatory changes, transmission cost adjustments, or “change in law” provisions that let the retailer alter your rate mid-contract.
- Compare ETF structures. A $150 flat ETF is cheaper to leave than $20 per remaining month on a long contract.
- Note the auto-renewal terms. Know what happens if you do nothing at contract end, and mark the notice deadline on your calendar.
In states that require it, retailers must provide a standardized disclosure document that lays out pricing at different usage levels, contract length, fees, renewable content percentage, and early termination costs. Read that document, not the marketing page. The disclosure is where teaser rates reveal themselves and where base charges stop hiding.