We are used to talking about “flat rates” in connection with our mobile phones, Internet, etc. and recently in the energy sector as well. To understand what a real flat rate is, you have to go back to the beginning.
It all started when mobile phones had not yet become smartphones and the flat rate appeared. It was a ground breaking idea: talk for as long as you want to, because at the end of the month you will always pay the same amount. It was soon taken up by Internet providers: use all the MB (and later GB) you need, because you will always pay the same.
But we need to distinguish between genuine and false flat rates ... and other options that offer even more than we expect in order to innovate.
Real flat rates
The original concept (the ones offered by mobile phone and Internet providers) is still valid: I use as much as I want to, but I always pay the same amount. I will use minutes or GB or kWh during both peaks and valleys, but the rate at which I am charged for my consumption is always the same, like a flat line.
This idea is obviously older than the term "flat rate" and is found in the idea of an open bar (I pay a fixed amount and drink as much as I want) and fees paid for services like gyms (I pay my fee and I can use the gym as many times as I want and go to as many classes as I want).
This is the key to a genuine flat rate. You pay a fixed amount regardless of how much you consume. This is all well and good when both parties comply with the minimum principles of transparency and common sense. Nobody would think it reasonable to go to a bar and order 20 colas in five minutes.
False flat rates
Because the idea of a flat rate is an attractive one, it has been used incorrectly to improve the image of some less attractive options. At first glance, they may look good, until you realise that they are guaranteeing what you pay each month... unless you go beyond a certain limit.
This is often an annual limit. In other words, you pay the same each month, but at the end of the year the company checks how much you have consumed and, if you have exceeded the limit, you have to pay an additional amount to compensate. This process is called “regularisation”.
These options are absolutely legal; the only problem is that they are marketing themselves by describing the product as a flat rate, when in fact it is not. Imagine we were talking about a gym. How would you feel if, at the end of the year, your instructor told you that you had exceeded the maximum time limit you could spend exercising and that when Christmas comes you will have to pay an additional 50 euros.
In the case of electricity and gas rates, there are many examples of false flat rates, just as there are in other sectors.