What is an Introductory-Rate Energy Plan?

What is an Introductory-Rate Energy Plan?

When you live in a deregulated market, you have the power of choice, meaning you can shop around for your energy supplier. You have to determine whether or not to sign up with a variable-rate, fixed-rate, or introductory-rate plan.

As you shop for the energy company that best meets your needs, you might become enticed by a super-low rate that's somehow much lower than most of the other available rates. Most likely, you've come across an energy plan with an introductory rate, but what exactly does that mean?

In short, this extremely attractive low rate lasts for your very first billing cycle with this energy company. So, if you're thinking of signing up on an introductory-rate plan — or you already have — these are some things to know.

What are the Advantages of an Introductory-Rate Plan?

When you sign on for an energy company's introductory rate, you enjoy flexibility and a great price. This introductory rate is a great way to give an energy supplier a trial run before you commit to anything long-term. You'll pay a low rate for the energy you do use for that first billing cycle, and there aren't any barriers to switching to another company or plan.

In most cases, if you want to leave a contract early, you can expect to pay a big fee. With this sort of plan, you can leave when your one-month trial is over without having to worry about any sort of penalty – no strings attached.

And if you end up liking the company, you can switch to a fixed-rate plan that will lock in a rate to provide some price security.

What are the Disadvantages of an Introductory-Rate Plan?

It should be pretty obvious: that ultra-low rate does NOT last forever. In fact, you have to keep an eye on your deadlines, or you could end up with a bad surprise: an energy bill that's much higher than you planned.

If you don't have a new energy plan lined up when your introductory rate ends — or switch to another company — you will be paying the going market rate for a variable-rate plan, which changes from month to month (and can be much higher than the price you paid in that first billing cycle).

What Should I Know About an Introductory-Rate Plan?

It would be wise to take a moment and make sure you understand what you are paying before you sign up with an introductory rate. Visit the website of the energy company offering that rate and read up on the details of the plan. Depending upon where you live, the document you need to examine will be called something like an "Electricity Facts Label," "Rate Plan," or "Disclosure Statement." There, you'll learn what the rate is, how long you will pay it, and whether there's a penalty for exiting the contract early.

If you choose to sign up with an introductory rate plan, we recommend that you mark your calendar with a reminder before that low rate rate expires so you have enough time to sign up for a new plan or switch to another energy company. Otherwise, you could be slammed with sticker shock.

Is an Introductory-Rate Plan Right for Me?

The upside of the introductory rate is simple: You, the customer, are the winner. In a deregulated market, energy suppliers know you have a choice about where you get your natural gas or electricity. Thus, they offer an introductory rate for a trial period as an inexpensive way to save while you continue learning about the right energy company for you.

Are you paying too much for electricity or natural gas? Check out Direct Energy's plans and see if you can save.

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