Fixed vs. Index Commercial Electricity Contracts in Illinois
By Illinois Commercial Energy editorial team
Reviewed by JakenEnergy commercial energy team
Choosing between a fixed and an index electricity contract is one of the most common decisions an Illinois business makes at renewal — and it is often framed too simply. Neither is universally cheaper; they carry different risks, and the right fit depends on the account.
Fixed contracts
A fixed contract sets the supply price per kWh for the term. Its value is budget certainty for the components the contract includes. The caution: a low headline fixed rate can carry broad exclusions, and delivery charges, riders, taxes, and any pass-throughs still move. Confirm what is included before treating a fixed price as "locked."
Index (pass-through) contracts
An index contract lets supply track a market index, so the price can rise or fall month to month. It offers potential savings and transparency with more variability — appropriate for accounts that can absorb monthly swings or that want to stay exposed to falling markets. It requires more attention than a fixed contract.
Block-and-index (layered) contracts
A block-and-index product fixes a portion of expected volume and floats the rest. Larger loads use it to balance certainty and flexibility and to hedge in stages. It is more complex to administer and compare.
How to choose
The decision comes down to the account's risk tolerance, load shape, and budget cycle:
- Tight budget, low appetite for variability → fixed often fits.
- Ability to absorb monthly swings, view on the market → index may fit.
- Large, sophisticated load → block-and-index can balance both.
Whatever the structure, compare offers on a fully-loaded, matched basis — see how to compare offers apples-to-apples — and read the contract terms, not just the rate, per the contract review guide. For the broader picture, start with commercial electricity in Illinois.
Sources
- Illinois Commerce Commission — Electric Choice Basics
- Illinois Power Agency — Electricity Supply Rates
No contract structure guarantees savings; each is a risk choice for a specific account.
Frequently Asked Questions
QIs a fixed or index electricity contract better for a business?
Neither is universally better. Fixed contracts trade potential market upside for budget certainty on the components they include; index contracts offer potential savings with more month-to-month variability. The right choice depends on the account's risk tolerance, load, and budget cycle — not on a general rule.
QWhat is a block-and-index contract?
A block-and-index (or layered) product fixes a portion of expected volume and lets the remainder float with the market. It is used mainly by larger loads to balance budget certainty against flexibility, and to hedge in stages rather than all at once.
QDoes a fixed rate mean the whole bill is fixed?
No. A fixed supply rate fixes the included supply components for the term, but delivery charges, many utility riders, taxes, and any pass-through components can still change. Always confirm exactly what the fixed price includes and what is excluded.