Variable or fixed? This is a question you should ask yourself not once but twice when you purchase a home. Firstly, in regards to your mortgage and second in regards to your utilities. That’s because in Alberta, we have the ability to choose how we want to pay for our gas and our electricity. In truth, the correct utlities “lingo” is slightly different from mortgage termonology although they work very similarily. The real question to ask yourself would be “regulated or contract”?
“Regulated” means that the rates charged by your provider are reviewed and approved by a regulator and can change from month to month based on market fluctuations. There is only one regulated provider for your geographic area so you don’t need to shop and compare providers. In this case, you are at the mercy of the market but there is an opportunity for savings should the rates go below what you may have agreed to on a contract, very similar to the benefits of a variable rate mortgage.
A contract arrangement is actually akin to choosing a fixed rate mortgage in that you sign a legally binding contract that allows you to obtain energy or gas at a guaranteed rate, regardless of fluctuations in the market, for a certain length of time – typically, three or five years. The benefit, of course, is having a fixed cost every month regardless of the time of year or jumps in the cost of the resources. However, there is a possibility you may end of paying more than your regulated neighbour over the long term for the benefit of security.
If you opt for the contract route, you are able to choose from a number of utilties providers. You would select your provider based on the product that best suits your needs. For instance, some providers use only green power, some charge only a nominal penalty to break the contract or none at all and some offer not only a fixed rate but also a variable style rate.
Which is best, contract or regulated? Just like choosing the right mortgage and lender, the right fit depends on your personal situation. Contract rates may be more competitive but if you are currently renting or thinking of moving in the near future, a contract may not be the right choice for you.
An excellent website called the Utilities Consumer Advocate provides many of the answers you may be looking for like:
To do some comparison shopping, check out the Historical Rates section to check the regulated rates against the competitive contract rates over the years.
And lastly, if the contract arrangement appeals to you, take a look at this guide to see if you’re ready for the commitment.
Most of us have been a regulated energy and gas consumer at some point but we’d really like to hear from those of you with contracts – what do you like about them, would you say they are cost effective? Have any of you switched back to regulated after being on a contract? Join the conversation, we’d love to have your input!