Fixed or floating? It’s not just a question for homeowners looking for a new mortgage. Opting for a fixed-price electricity deal can guard against power price hikes. But is it likely to deliver you savings? Canstar looks at the pros and cons of fixed-rate power plans.
What is a fixed-rate power plan?
A fixed-rate power plan delivers certainty around power costs – the per unit (kWh) rate for electricity – over the course of the contract, which usually lasts between one and two years.
Such plans differ from flexible-rate plans, which do not require a customer to commit to a long-term contract. Instead, a flexible-rate plan permits the retailer to change its rates whenever it wants, but also frees the consumer to cancel the contract and switch to a new provider at any time.
- Fixed-rate plan – a set per unit rate for power, but with a long-term contract commitment
- Flexible – rates can change, however consumers are free to shop around for a better deal whenever they like
It’s important to keep in mind that many fixed-rate plans include a break fee that applies if a contract is terminated early. However, if you’re signed to a long-term contract and do want to change retailers, it’s still worth talking to your retailer about how the fee applies. You never know, the power company might be able to offer you a better deal or not apply the break fee.
Which power companies offer fixed-rate plans
Fixed-rate power plans were once the norm across the electricity market in New Zealand. However, more recently, the energy market has moved to offer consumers greater flexibility.
As a result, most power companies don’t offer fixed-rate power plans any more, and those that do reserve them for their bundled power and broadband deals.
The power companies rated by Canstar Blue that offer fixed-term contracts include:
Mercury offers a one-year fixed contract that has the same daily fixed rates and electricity charges per kWh as its open, flexible plan. In return for agreeing to sign-up for 12 months, you get a $250 signing-on credit. However, a termination fee of $150 does apply if you break your contract early.
Mercury also offers fixed-term power and broadband bundles that include Samsung appliances as part of the deal.
Genesis offers three power plans: Basic, Plus and EV. The Basic and EV plans are fixed term only, while the Plus offers the choice of a fixed or variable contract. However only the fixed Plus plan offers a $100 sign-on bonus.
A termination fee of $150 applies to all Genesis’ fixed plans if you break your contract early.
Meridian offers two standard residential plans: a flexi plan with no contract and a two-year fixed plan. At a residential, central Auckland address (at time of writing), the flexi plan offered lower standard-user charges (both daily rates and kWh) than the fixed contract. Plus the flexi plan offered $10 monthly credits, whereas the fixed two-year plan offered a $200 join-up credit.
Meridian also offers fixed-term EV, bach and solar contracts.
Slingshot’s energy-only plans are contract free. Only its broadband-power bundles come with a fixed 12-month term, along with a $250 joining credit.
Nova’s energy-only plans are contract free. Only its broadband-power bundles come with a fixed 24-month term, along with the choice of either an LG TV or a Samsung phone … plus the possibility of a $300 early termination fee per broadband or energy service.
Fixed-rate power plan pros and cons
Of course, determining whether a fixed-rate plan is a viable option for your household depends upon a range of factors. For instance, if you’re renting, or if your circumstances are likely to change in the short-term, a flexible-rate plan might be the better option.
Meanwhile, if you’re a home-owner, or have committed to a long-term rental contract, a fixed-rate plan may provide security against possible power price rises.
However, while actual power prices have risen over the past decade, real prices (those adjusted for inflation) have actually dropped!
Which way are power prices headed?
Nationally, the average power consumer (four-person family) using 22kWh per day on the cheapest low-user tariff available without a fixed-term contract, pays around 33.7c per kWh.
Ten years, ago, the national average was approx 27.5c per kWh, which when adjusted for inflation is 35.6c in today’s money. This means that despite what you might read about the cost of power, it’s cheaper now than it was back in 2013.
This means that while locking in your power prices may protect you from any short-term fluctuations in the cost of electricity, over the longer term it’s unlikely to save you considerable sums.
The steady reduction in power prices is probably why few power companies now offer fixed-term contracts, and mainly reserve them for their telco bundle deals.
However, as power prices vary region by region, it’s always worthwhile comparing the range of rates, and different types of deals, on offer from power companies in your area. And, as part of this process, it’s important to identify the potential benefits a fixed-term plan could deliver over other types of plans.
Shopping around and comparing prices and deals will always help you to narrow down the best options for your household.
→ Related article: How Much Are You Paying For Power?
Each year Canstar Blue rates NZ power companies for customer satisfaction and value for money. You can see the table below for some of the results, or you can click on the button below for the full results of our survey.
Canstar Blue’s latest review of NZ power companies compares them on customer satisfaction. The table below is an abridged version of our full results, available here.
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Canstar Blue NZ Research finalised in April 2023, published in June 2023.
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About the author of this page
This report was written by Canstar’s Editor, Bruce Pitchers. Bruce has three decades’ experience as a journalist and has worked for major media companies in the UK and Australasia, including ACP, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.