Energy Price Volatility
Causes, Recent Spikes & How to Protect Your Bill
What Is Price Volatility in Energy Markets?
Electricity price volatility describes how quickly or widely prices can change. In the energy industry, this refers to the prices of electricity or natural gas relative to consumer demand.
Causes of Energy Price Volatility
Energy prices shift based on changes in supply and demand. When energy supply increases, prices tend to go down, and when there is a shortage, prices go up. When demand for energy increases, prices tend to rise, and when demand decreases, prices tend to fall. That’s why energy bills fluctuate on variable and indexed-rate plans.
Extreme weather conditions
Extreme hot or cold temperatures will increase energy demand, driving costs up. Likewise, extreme weather conditions, such as hurricanes, can disrupt supply and also increase costs.
Economic & Policy Shifts
Growing economies with increased infrastructure demands drive up energy usage and costs. Poorly performing economies often result in reduced demand and lower costs.
Fuel Supply & Infrastructure
The majority of the energy we use is generated from fossil fuels such as coal and natural gas. This is generally the cheapest form of energy generation. When there is a shortage of these fossil fuels, more expensive forms of energy generation need to be used, resulting in natural gas price spikes and rate hikes for various fuel sources.
How Price Volatility Shows Up on Your Energy Bill
Commodity supply prices vary by region and are influenced by their own unique market conditions, production challenges, and transportation methods. Review our Texas electricity plans here.
Variable, Indexed, and Fixed: Comparing Plan Types
Indexed and variable-rate plans typically mirror market rates. As such, customers on these plans are exposed to market price volatility. A variable rate plan is ideal when rates are relatively stable or expected to decrease in the near future.
Fixed-rate electricity plans offer customers a set rate for their electricity supply over a specified period. Your rate is fixed and unaffected by changes in commodity prices, protecting you against price volatility.
Learn more about fixed-rate vs. variable rate energy plans.
5 Tips to Manage Volatile Energy Prices at Home
There are numerous ways to protect against price volatility at home. Some top suggestions are to:
- Seal air leaks and improve insulation around windows, doors, attics, and ductwork.
- Instead of reaching for the thermostat, add more layers to your clothing in the winter or turn on fans in the summer.
- Use smart thermostats to help automate your savings during peak pricing hours.
- Run major appliances during off-peak hours.
- Monitor your usage through your energy provider’s app and adjust your usage accordingly.
Remember to always shop and compare residential electricity plans.
Why Fixed‑Rate Plans from Just Energy Help You Stay Steady
If you don’t like the idea of having to more closely manage and monitor your energy usage, consider a fixed-rate energy plan. Just Energy’s fixed-rate plans maintain the same energy rate for the length of the contract. These plans are easier to budget for and provide stability and peace of mind, eliminating the need to track wholesale energy markets to predict your bill.
Energy price volatility doesn’t have to make you feel uneasy about potentially sky-high energy bills. Explore Just Energy’s fixed-rate plans to lock in your rate today and budget with confidence, no matter the season.
Energy Price Volatility FAQs
Why are energy prices more volatile in summer and winter?
There’s more demand for cooling and heating during the summer and winter months, straining the energy supply and driving up costs.
How does a fixed‑rate plan protect me if wholesale prices drop?
Fixed-rate plans have set rates that remain constant, helping you avoid rate spikes. This also means you may miss out on short-term price dips, but you’ll experience the long-term benefit of stable, predictable energy bills.
Are renewable energy prices less volatile than fossil fuels?
Yes, renewable energy prices generally aren’t as volatile, but prices can still fluctuate based on wind and sunshine patterns.
What is the difference between indexed and variable rates?
Indexed rates are based on a published wholesale electricity price index with a markup added. Variable rates are determined and set by your provider, though they are typically influenced by market conditions.
Can smart thermostats really lower bills during price spikes?
Yes, smart thermostats can automatically reduce your electricity usage during peak demand when electricity rates are highest.