Power companies offer contracts in all kinds of increments. Common lengths for electricity contracts include 6 months, 12 months, and 24 months. 24 month electricity plans fall on the long side of this spectrum. More exotic lengths include 1, 3, 36, and 48 months.
Sometimes other features of a contract, such as the power source, can change along with the length. You’ll also want to pay attention to cancellation fees; if you choose a long contract and want to get out early, you’ll have to fork over some additional money. Make sure you know all the components of the plan you’re selecting!
Choose a Contract Length
How long should your contract be? There are a few things to consider when making your decision:
- Is the company reliable? If you don’t know the company you’re signing up with, you may want your contract to be shorter. If things go terribly wrong, you’ll be able to switch providers more quickly. Generally speaking, if you’re not sure about a plan you should probably opt for a shorter contract.
- Do you like fiddling with your energy bills? If you enjoy shopping around for a good deal, you may not 24 month electricity plan to stick you with the same company for two years. You can keep coming back to CompareElectricity.com to see what new companies have entered the market and what offers have changed.
- Is there a bonus? Many companies offer some incentive to entice signups for a 24 month plan rather than a shorter one. A bonus means immediate savings, but it may not outweigh your long-term considerations.
Fixed vs. Variable Rate Plans
The rate agreement in your contract should affect your decision-making about length. Many companies will allow you to choose between fixed and variable rate plans. Fixed plans bill you at the same rate each month. You pay the price you see when you enter your zip code in the box above. With a variable rate plan, the price changes along with the market.
You’re likely to save money right off the bat by switching to a new variable rate plan. These plans typically offer electricity at substantially lower rates than those offered automatically by local utility companies. Fixed rate plans, by contrast, will start out at a slightly higher rate, since they are expected to fall below the market in the future.
Rate fluctuations should still affect your decision about contract length because fixed rate plans can diverge further over the market over time. If you sign up for a 24 month electricity plan with a fixed rate, you costs may differ substantially from the market’s by the year-and-a-half mark. Divergence isn’t necessarily good or bad—you might be overpaying or you might be saving—but it is something you should consider more carefully for a larger contract.