Let me save you some time. If someone tells you "fixed is always better" or "variable is always better," they're either selling you something or they don't know what they're talking about. The real answer — like most real answers — is "it depends." But let me walk you through what it actually depends on, because this decision affects your bottom line more than most people realize.

Fixed-Rate Contracts: The Case for Certainty

A fixed-rate contract locks in your price per kWh (electricity) or per therm/CCF (natural gas) for the contract term — usually 12 to 36 months. The market can go haywire and your rate doesn't budge. There's a reason CFOs love these.

When fixed rates make sense:

• Budget certainty is non-negotiable: Hospitals, schools, government agencies, property management companies — if you need to tell the board exactly what energy will cost next year, a fixed rate is your friend. Variance is the enemy of budgeting, and fixed eliminates it.
• Forward prices are favorable: When the forward market is priced below historical averages, locking in is like buying insurance at a discount. You won't always get this opportunity, so recognize it when it shows up.
• Your market is structurally volatile: ISO-NE winter spikes. ERCOT summer chaos. NYISO Zone J's permanent price premium. If your market has a reputation for ugly surprises, a fixed rate is a hedge against the months you don't want to think about.
• You're early in a rising cycle: Gas prices trending up? Capacity costs climbing? Regulatory charges increasing? Lock in now. Waiting costs you real money when the trend is against you.

The tradeoff: You're paying a risk premium. The supplier bakes in a little extra to cover the price risk they're taking on. If the market drops after you sign, you're overpaying compared to what variable would have cost. And good luck getting out early without termination fees. That's the deal you made.

Variable-Rate Contracts: The Case for Flexibility

Variable-rate contracts — also called index, floating, or market-based — move with the wholesale market. Your rate tracks a published index: the utility's default rate, a day-ahead market price, a monthly settled wholesale price. When the market drops, you benefit. When it spikes, you feel it.

When variable rates make sense:

• You think prices are headed down: Forward curve inflated by a scary winter forecast or a capacity auction spike? Those temporary factors unwind. A variable rate lets you ride the decline instead of being locked into the panic pricing.
• Your usage is all over the map: Variable contracts usually skip the bandwidth provisions — those penalties for using more or less than you estimated — that fixed contracts love to include. If your consumption is unpredictable, variable gives you breathing room.
• You can actively manage your exposure: Energy management systems, backup generators, the ability to shift load off-peak — if you have these tools, a variable contract lets you use them to reduce cost in ways a fixed rate never would.
• You just need a bridge: Fixed contract expiring in three months and the market looks terrible for a new long-term deal? Go variable for the short term. Don't lock in bad pricing just because you're scared of the alternative.

The tradeoff: One bad month can ruin your year. A polar vortex, a heat wave, a pipeline going down — any of these can erase six months of savings in a single billing cycle. Variable isn't for people who lose sleep over bill fluctuations.

The Blended Approach: Block-and-Index

Here's what the smartest commercial buyers actually do: they don't pick one. Block-and-index structures let you fix a chunk of your expected load (the "block") at a locked rate and let the rest float with the market.

Say you're a manufacturer using 1,000 MWh per month. You fix 700 MWh at a negotiated rate and let the remaining 300 MWh ride the index. You get budget certainty on 70% of your load and market upside on the rest. It's not exciting, but it works.

Block-and-index is particularly effective for:

• Large consumers with baseload and variable load: Fix the stuff that's predictable. Float the stuff that isn't. Simple.
• Businesses in seasonal markets: Your variable portion gets cheap shoulder-season prices while the fixed block shields you from summer and winter peaks.
• Organizations that hate timing risk: Instead of betting the farm on a single lock date, you're averaging in automatically. It won't be optimal, but it won't be catastrophic either.

How Market Conditions Should Influence Your Decision

Don't make this decision in a vacuum. What's happening in the market right now should heavily influence your structure:

• When natural gas prices are low: Electricity prices follow gas in most markets. Low gas is your window to lock in fixed rates before the inevitable recovery. These windows don't stay open forever.
• When capacity auction results are known: PJM and ISO-NE set capacity costs years in advance. If upcoming auction results are favorable, fixed-rate contracts that incorporate those future costs become more attractive. This is knowable information — use it.
• During economic slowdowns: Less industrial demand means lower wholesale prices. Variable rates tend to perform well. And fixed rates locked during slowdowns capture long-term value that looks very good when the economy picks back up.
• During geopolitical chaos: Pipeline disruptions, trade wars, international conflicts — these push prices up in unpredictable ways. Fixed rates insulate you from the stuff you can't see coming. And let's be honest, there's always something you can't see coming.

Our Recommendation

I'll spare you the "it depends" one more time. But here's what actually matters: start with your organization's risk tolerance and budget process. How much volatility can you stomach? How much does your CFO need to know in advance? Overlay that against what the market is doing right now. Then build accordingly.

A good energy broker doesn't push fixed or variable — they push understanding. The goal is for you to know exactly what you're trading off so the decision is yours, not theirs. If your broker has a strong opinion about your contract structure before they've looked at your load profile and budget cycle, that should tell you something.