What are variable rate plans?

When choosing an energy plan in Australia, one of the most important decisions you’ll make is whether to go with a fixed rate or a variable rate plan.

While fixed rate plans offer stability, variable rate plans provide flexibility, and it may even help you save, depending on market trends.

So, what exactly are variable rate energy plans, and how does it work? This guide will walk you through the essentials, including the pros and cons, how these plans are structured, and which major Australian providers offer them.

Understanding variable rate energy plans

A variable rate energy plan is a type of electricity or gas contract where the rates you pay per kilowatt-hour (kWh) or megajoule (MJ) can change over time. These changes usually reflect shifts in wholesale energy prices, regulatory adjustments, or seasonal supply and demand.

Unlike fixed rate plans - where your rates are locked in for a set period - variable rate plans are more dynamic. Your rates can increase or decrease, typically with some notice from your retailer.

How pricing changes work

Retailers who offer variable rate plans are required to notify customers of upcoming price changes - usually 5 to 10 business days in advance. These changes can be influenced by:

While some fluctuations may be small, others can be significant, particularly during high-demand periods like summer heatwaves or when supply is constrained.

Pros of variable rate energy plans

  • Potential for savings: When wholesale prices drop, those savings can be passed on to customers - particularly if you’re with a retailer that responds quickly to market changes.
  • No lock-in contracts: Most variable rate plans don’t require a long-term commitment, offering flexibility to switch if prices rise or better deals become available.
  • Access to market innovation: Newer retailers offering dynamic pricing or real-time usage tracking typically structure plans around variable rates.

Cons of variable rate energy plans

  • Price volatility: Rates can increase with little warning, especially during peak periods or energy shortages.
  • Budgeting challenges: It can be harder to predict your monthly bills compared to fixed rate plans, making budgeting more difficult.
  • Limited protection: Unlike fixed contracts, variable rate plans don’t shield you from sudden market price spikes.

Who should consider a variable rate plan?

Variable rate plans are best suited for:

  • Informed consumers who monitor energy market trends and are willing to switch if better offers appear.
  • Low-usage households less impacted by short-term price fluctuations.
  • Renters or short-term residents who prefer not to be tied into fixed contracts.

It may not be ideal for households with strict budgets or those who need consistent energy costs throughout the year.

Which Australian energy providers offer variable rate plans?

Many of Australia’s major and emerging energy retailers offer variable rate plans. Below are some examples:

AGL

AGL’s variable rate plans come with flexible conditions and occasional bill credits or usage discounts. The Value Saver plan is a popular option, offering variable rates and no lock-in contracts.

EnergyAustralia

EnergyAustralia’s Total Plan Flexi is a typical example of a variable rate offer with flexible terms and digital account management. It can also provide regular usage insights to help track your spending.

Red Energy

Backed by Snowy Hydro, Red Energy offers variable rate plans with the added benefit of customer service based in Australia. Many plans include rewards or incentives such as Qantas Points or environmental offsets.

Origin Energy

One of the Big Three retailers in Australia, Origin offers several variable rate plans such as the Everyday Rewards and Flexi options. These plans often include no exit fees and the ability to link loyalty programs like Everyday Rewards or Qantas Points.

Tango Energy

Tango Energy - part of Pacific Hydro - focuses on competitive pricing and simple plans. While better known for fixed rate offerings, It can also have variable rate plans with flexible terms and low usage rates in some states.

Powershop

Known for its green credentials, Powershop offers a different spin on variable pricing. Customers can pre-purchase energy packs at discounted rates, effectively managing cost fluctuations while staying on a variable plan.

Tips for managing a variable rate plan

  • Stay informed: Keep an eye on energy market trends and retailer notices.
  • Use monitoring tools: Many providers offer apps or dashboards to track your usage in real-time.
  • Compare regularly: Don’t hesitate to switch if your current plan becomes too expensive.

Is a variable rate plan right for you?

Variable rate energy plans can be a great fit for flexible households who want to take advantage of market shifts and don’t mind a little unpredictability. However, it may not be suitable for those who want stable, long-term pricing, especially in a volatile market.

If you’re unsure which plan is right for your home, comparing multiple offers side-by-side can help you make a confident decision.

Need help choosing an energy plan that fits your lifestyle and budget? Speak to the experts at Compare Energy.

Call 1300 790 106 today to compare energy plans and find the best variable or fixed rate option for your home.