What is a variable rate
A variable rate electricity plan means your generation rate can change from month to month. Unlike a fixed-rate plan — where you lock in a price for the full contract term — a variable plan adjusts based on market conditions, supplier pricing decisions, or both.
Variable rates can go up or down. In falling-rate markets, variable customers benefit as their rates decrease. In rising-rate markets, variable customers pay more while fixed-rate customers are protected.
The appeal of variable plans is flexibility: they typically have no early termination fee, allowing you to switch to a better offer anytime without penalty. The risk is unpredictability: you don't know what your rate will be next month.
The two types of variable rates
Not all variable rate plans work the same way. Understanding the difference is critical to making a good decision.
1. Introductory variable (teaser rates)
An introductory variable plan starts with an artificially low rate — sometimes dramatically low — that resets to a much higher standard variable rate after a promotional period. These periods are typically 1-3 months.
Example: A plan advertises 7.59¢/kWh. The fine print shows that rate applies only for month one; starting month two, the rate becomes 14.99¢/kWh (variable, subject to change). The 7.59¢ is a teaser designed to attract sign-ups. The 14.99¢ is what you'll actually pay for most of your enrollment.
Teaser rates are the primary reason variable plans have a bad reputation. They're not really about offering flexibility; they're about using a low headline number to win your business, then profiting from inertia once the rate resets.
2. Standard variable (no teaser)
A standard variable plan has no introductory period. Your rate from month one follows market conditions. It may be higher or lower than fixed alternatives on any given month, but there's no promotional bait-and-switch.
Standard variable plans are legitimate products for customers who want flexibility without commitment. They're commonly used as bridge plans between fixed contracts, or by short-term residents who know they'll move soon.
➤Compare fixed and variable plans in your areaWhen variable plans genuinely make sense
Despite their risks, variable rate plans serve certain situations well. If any of the following apply to you, a variable plan might be the right choice.
Short-term residents (under 6 months expected)
If you're renting month-to-month or know you'll move within a few months, locking into a 12-month fixed plan with an early termination fee doesn't make sense. A standard variable plan lets you get competitive rates without the commitment. When you move, you simply close your account — no ETF to worry about.
Falling-rate environments
Wholesale electricity prices fluctuate with fuel costs, weather, demand, and regulatory changes. During periods when wholesale prices are declining, variable-rate customers benefit from lower rates each month. Fixed-rate customers, meanwhile, continue paying their locked-in price even as the market drops.
The challenge: predicting market direction is difficult. If you're not closely following wholesale market trends, you're essentially gambling that prices will fall.
Bridge plans between fixed contracts
If your fixed-rate contract is expiring and you haven't found the right replacement plan yet, a month or two on a standard variable plan gives you time to shop without auto-renewing into unfavorable terms.
High flexibility need
Some customers want the ability to switch suppliers anytime without penalty. Maybe you're testing a supplier's customer service before committing long-term. Maybe you're an engaged shopper who monitors rates frequently. Variable plans let you exit at any time.
When variable plans don't make sense
Variable plans carry real risks. For most residential customers in most situations, fixed rates offer better value.
Long-term residents in rising-rate environments
If you own your home or have a multi-year lease, and wholesale prices are rising, a variable plan exposes you to steadily increasing rates. A fixed-rate plan locks in today's price, protecting you from market increases.
Households with strict budgets
Variable rates make budgeting harder. Your electricity cost could differ significantly from month to month based on factors outside your control. If you need predictable expenses, fixed rates provide that certainty.
Anyone seduced by teaser rates
If you're drawn to a variable plan primarily because of an eye-catching introductory rate, stop. Calculate the effective rate over the full term. The math almost always favors fixed alternatives.
The honest math on introductory variable rates
This is the calculation that exposes teaser-rate manipulation. Walk through it once and you'll never be fooled again.
Example calculation
Plan A: 1-month introductory rate at 7.59¢/kWh, then variable at 14.99¢/kWh for months 2-12.
Plan B: 12-month fixed rate at 9.09¢/kWh.
At first glance, Plan A looks attractive — 7.59¢ is much lower than 9.09¢. But let's calculate the effective rate over 12 months.
Plan A effective rate:
- Month 1: 7.59¢
- Months 2-12: 14.99¢ × 11 months = 164.89¢ total
- 12-month total: 7.59¢ + 164.89¢ = 172.48¢
- Average per month: 172.48¢ ÷ 12 = 14.37¢/kWh
Plan B effective rate: 9.09¢/kWh (same every month)
Plan B saves you 5.28¢/kWh compared to Plan A. At average PA usage of ~850 kWh/month, that's $44.88 in annual savings by choosing the “higher” fixed rate over the teaser variable.
The 7.59¢ headline is marketing, not value. The 14.37¢ effective rate is what you'll actually pay.
How to evaluate a variable plan's terms
If you're considering a variable plan, review these elements in the Plan Information Document:
Is there an introductory period?
If yes, calculate the effective rate over the full term as shown above. Compare that effective rate to fixed alternatives, not the teaser rate.
How is the rate determined?
The best variable plans tie their rates to a transparent index (like wholesale market prices) plus a disclosed margin. This lets you understand how the rate will move. Plans that simply say “rate may change” without explaining the methodology give the supplier too much discretion.
What's the early termination fee?
Most standard variable plans have no ETF — that's their main benefit. If a variable plan has an ETF, reconsider. You're taking rate risk without getting flexibility in return.
How much notice before rate changes?
Some states require suppliers to notify customers before rate changes take effect. Pennsylvania requires disclosure, though timing requirements vary by plan type. Understand whether you'll have warning before your rate increases.
➤Compare rates in your areaPennsylvania-specific notes
In Pennsylvania, variable rate plans must be clearly labeled per PA PUC rules. The Disclosure Statement must specify:
- Whether the rate is fixed, variable, or introductory
- For introductory plans: when the rate changes and to what
- How often the variable rate can adjust
- Any early termination fees
PA Power Switch allows filtering by plan type, making it easier to find standard variable plans without teaser gimmicks if that's what you need.
Frequently asked questions
How often can a variable rate change?
Most variable rate plans adjust monthly, typically at the start of each billing cycle. Some suppliers change rates more frequently during extreme market conditions, but monthly is standard. The Plan Information Document should specify the adjustment frequency. If it doesn't, ask before enrolling.
What's the difference between a variable rate and a teaser rate?
A teaser rate is a specific type of variable rate — it's an artificially low introductory rate that resets to a higher standard rate after a promotional period (usually 1-3 months). A standard variable rate is not promotional; it simply follows market conditions from day one. The teaser is designed to attract sign-ups; the standard variable is a legitimate product type for customers who want flexibility.
How do I calculate the effective rate of a variable plan?
For introductory variable plans, multiply the introductory rate by the introductory months, add the standard rate times the remaining months, then divide by the total months. Example: (7.59¢ × 1 month) + (14.99¢ × 11 months) = 172.48¢ total over 12 months, or 14.37¢ per month average. Compare that average to fixed-rate alternatives.
Can a supplier raise a variable rate at any time?
Within the terms of your contract, yes. Variable rates are designed to fluctuate. Most contracts specify how rate changes are calculated (often tied to wholesale market indices plus a margin). The supplier isn't arbitrarily raising rates — they're following the contracted formula. This is why variable plans carry risk in rising-rate environments.
Should I ever choose a variable rate over a fixed rate?
Variable rates make sense in specific situations: when you're certain you'll move within a few months and don't want an early termination fee, when wholesale prices are falling and you want to benefit from declining rates, when you're between fixed contracts and need a short-term bridge plan, or when you're highly engaged and willing to monitor and switch frequently. For most people, fixed rates offer better value and less risk.
