Power offers: fixed or variable price, which is more convenient to choose?
Choosing between fixed price and variable price for Power is one of the first steps to manage your Energy supply in an informed way. There is no one-size-fits-all solution: the choice depends on the conditions of the offer, the market trend and the level of predictability you want for the expense related to the Energy component.
In an international context marked by strong geopolitical instability and volatility in Energy prices, fixed price offers today take on an even more relevant value, because they allow you to lock the price for 2 years, guaranteeing stability and protection from market fluctuations throughout the contractual period.
In this guide, we will see how the two options work, to help you navigate better and identify the one most suitable for your needs.
How is the price of electricity composed?
How is the price of electricity composed?
The price of electricity in the bill is composed of several elements. Among these, one of the main items is the expense for the Energy component, that is, the component linked to the cost of the Energy purchased. It is precisely this component that, in Free market offers, can be proposed at a fixed price or at a variable price. The other components of the bill instead follow different rules and may be updated over time according to what is provided for by regulation and by the contract.
Fixed price and variable price: the differences
The main difference between variable price and fixed price for electricity depends on the possibility or not for the unit cost of the Energy component to vary over time, according to a predefined method.
Fixed price
A fixed price offer provides for a fixed and unchanged price of the Energy component for at least 12 months: Enel offers price locked for two years (24 months). This type of contract can be useful, for example, for a customer who, knowing their own consumption, wants to carry out more accurate planning of their Energy expenses, since the unit price of the Energy component, expressed in €/kWh, and its duration are contractually established.
Variable price
A variable price offer instead provides that one or more components contributing to determining the expense for the Energy raw material (e.g. the price of the Energy component) undergo variations linked to the prices of Energy or gas in wholesale markets or resulting from the application of an index defined in the contract (e.g. PUN Index GME) and which varies at regular intervals over time (e.g. monthly). This type of contract can be useful, for example, for a customer who wants to seize all the opportunities related to variations in wholesale Energy markets.
The value of the bill will then also be composed of other items in addition to the Energy component (by way of example: the other items that make up the expense for the Energy raw material, the expense for the transport of electricity and meter management, the expense for system charges), which will then determine the final cost that the customer will have to pay.
Fixed or variable price: which is more convenient?
Depending on their consumption habits, the customer can choose the type of contract that best suits their characteristics. It is therefore useful to assess some factors to understand which formula is most suitable for their consumption habits:
Stability of spending: the fixed price may be preferable for those who want greater predictability on the Energy component and prefer to reduce exposure to wholesale market fluctuations.
Market trend: the variable price may be interesting for those who accept greater exposure to market movements and want to be able to benefit from any decreases in the reference index.
Time slots: the electricity consumption time slots also affect the electricity bill, and can have an impact on the final cost of the supply based on when Energy is used.
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