It's important to understand that consumers have a choice between different types of contracts when looking for electric suppliers in NJ. Amongst all the various offerings from suppliers, all electricity contracts will fall into three categories; fixed, variable, and a combination of both. Throughout this article, we will look at all of these contract types and detail the differences and similarities between the three. By the time you've finished reading this piece, you should have a much greater understanding of the types of electricity contract you can choose between in New Jersey.

Fixed Contract

The first contract we will look at is one that's based upon a fixed price per unit. With this contract, you will be charged a set price per unit over a certain period of time. The length of time you're charged this price will depend on the length of your contract. Your supplier will tell you how long the contract is and how long the price is fixed for before you sign anything.

With a fixed rate, your electricity supplier cannot charge you more for the electricity you use in your home. Even if the electricity rates in New Jersey go up, you will still be at the same fixed rate when your contract started. The obvious benefit of this is that you can end up paying less if the electricity rates increase, which saves you money. However, the negative is that rates can just as easily decrease below what you're currently paying. But, being on a fixed contract, you're forced to stick with your rate and could end up paying more.

Variable Contract

Variable pricing refers to a contract where the price per unit can fluctuate depending on the current market. For example, if the cost of electricity goes up, then this will be reflected in how much you pay for your units. Likewise, if the cost goes down, you will pay less for each unit of electricity you use.

Clearly, this contract also has pros and cons - you could pay less if prices drop but could pay more if they increase. Before you sign a variable price contract, you must speak with the supplier and get them to explain a few key things to you. For one, understand how often a variable price can change. Generally speaking, electricity prices in New Jersey change on a seasonal basis. Most suppliers change their rates on June 1st and October 1st of each year. So, if you're on a variable contract, you might not see huge fluctuations every day/week.

Secondly, make sure you know if there's a cap on how much they charge you - if there is, then this means they can't charge you more than the capped price no matter how much the rates go up.

Combined Contract

A final option is a contract that combines both fixed and variable rates. Some suppliers will set a fixed rate for a period of time and then change your contract to a variable one. So, you end up enjoying features of both contract types.

After reading this, you should understand the different electricity contracts available for you as a New Jersey resident. Take your time and decide which option is the best for you and your current situation.