Fixed-price energy contract vs the default rate: how to work out if it pays in Canada

A fixed-price energy contract pays off only if, over the whole term, the contract's total cost per unit (energy price plus admin fees, plus Ontario's Global Adjustment for electricity) is lower than the regulated default would have been. Because nobody knows the default rate two or five years ahead, a fixed contract is mainly a purchase of price certainty, not a guaranteed saving. In Ontario the comparison is often lopsided: Regulated Price Plan prices already include the Global Adjustment, while a retail electricity contract adds it as a separate monthly charge on top of the contract price. In Alberta, the default Rate of Last Resort is itself fixed until 31 December 2026, which narrows the case for a contract during that period.

This guide belongs to comparing plans with worked examples.

What a contract replaces, and what it does not

Ontario electricity: the Global Adjustment problem

The Global Adjustment (GA) recovers the cost of contracts and regulated payments to generators that the wholesale market price does not cover. RPP customers pay it through the TOU, ULO or tiered price. A retail contract customer pays the contract price plus a GA charge per kWh that changes every month and is published by the IESO.

Illustrative comparison, 8,400 kWh a year:

The GA figure here is an assumption for illustration; the actual monthly GA for Class B customers is on the IESO website. The point is structural: a contract price that looks "lower than the RPP" may not be once the GA is added. Ontario rules require retailers to give a disclosure statement and price comparison with the contract; read it, because it shows the RPP price next to the contract price.

Alberta: comparing with the Rate of Last Resort

The RoLR is 12.01¢–12.06¢/kWh depending on area for 1 January 2025 to 31 December 2026 (see Alberta's RoLR vs retailers). A five-year fixed contract signed in late 2026 runs mostly in years where the default is not yet known. Two sensible approaches:

1. Compare the contract with the current RoLR and with the RoLR approved for 2027 when it is published.
2. If you sign, prefer terms with a modest exit fee so you can leave if the default turns out lower.

For gas, the Default Rate Tariff changes monthly, so a fixed gas price is a hedge against winter spikes; compare it with the last 12 months of DRT prices for your area, weighted by your monthly GJ.

Break-even arithmetic

Per-unit break-even: the default price at which you are indifferent = contract price + (annual fees ÷ annual units) + (in Ontario) average GA.

Worked example (Alberta, illustrative): contract 11.4¢/kWh, $6.00/month admin fee, 7,200 kWh a year. Effective price = 11.4¢ + ($72 ÷ 7,200) × 100 = 11.4¢ + 1.0¢ = 12.4¢. Against a default of 12.01¢ plus that provider's own admin charges, the contract only wins if the default's admin charges exceed about 0.39¢ per kWh ($28 a year) or if the default rises during the term.

Leaving early: if you are on a contract and the default is now cheaper, use the contract payback tool with the exit fee as the cost and (contract effective price − default) × annual kWh as the yearly saving.

Exit fees and renewals

Ontario (Energy Consumer Protection Act, 2010 and O. Reg. 389/10): you may cancel within 10 days after acknowledging receipt of the contract copy, cancel without cost up to 30 days after receiving the second bill under the contract, and later cancel on 10 days' notice, with the fee for contracts entered into after the 2016 amendment capped at $50 for a household contract. Renewal or extension requires the retailer to send a renewal package 60 to 120 days before expiry; a contract that was automatically renewed or extended can be cancelled without cost. Details are in cancellation rights.

Alberta: every retailer has a 10-calendar-day cooling-off period, according to the UCA. Exit fees are set in each contract; read them, and ask the UCA if a fee looks inconsistent with what you agreed.

When a fixed contract can make sense

• You strongly prefer a predictable price and accept paying for that certainty.
• You compared the total effective price, with fees and GA, against the default for the same period.
• The exit fee is small or capped, so you can leave if conditions change.
• You plan to stay at the address for most of the term (in Ontario, moving permanently lets you cancel without cost).

Mistakes to avoid

• Comparing contract price with the RPP price without adding GA.
• Ignoring fees on low usage. A $7 monthly fee on 400 kWh a month adds 1.75¢/kWh.
• Renewing by inertia. Re-compare when the renewal notice arrives.
• Bundles you do not need. Some offers attach products such as equipment rentals; evaluate each separately.

Related: TOU vs ultra-low overnight vs tiered for the Ontario default you are comparing against, gas bill calculation in GJ and m³ for gas contracts, and equal billing if what you really want is predictable payments rather than a fixed price.

FAQ

Do I lose the Ontario Electricity Rebate on a contract?

No, eligible accounts keep it.

Can a retailer sign me up at my door in Ontario?

No. Ontario's Energy Consumer Protection Act prohibits selling or offering electricity or gas contracts in person at a consumer's home.

Is a variable retail plan the same as the default?

No. A variable retail price follows the retailer's own formula, not the regulated default.

Who licenses retailers?

The OEB in Ontario. In Alberta, retailers that market energy to households need a provincial energy marketing licence and must follow AUC rules, while the Market Surveillance Administrator monitors market conduct and the UCA mediates consumer disputes.

Sources

• Ontario Energy Board — retail contracts, disclosure statements and price comparisons
• Independent Electricity System Operator — monthly Global Adjustment
• Ontario e-Laws — Energy Consumer Protection Act, 2010 and O. Reg. 389/10
• Utilities Consumer Advocate — RoLR, DRT, switching and cooling-off period
• Market Surveillance Administrator — Alberta retail market conduct