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Energy deregulation puts you in control of your energy provider and electric plan. In Texas, where most cities operate with deregulated energy markets, residents and businesses can choose from a range of energy providers and plan options.
With so many choices, finding the right electricity rates and plans can be a big undertaking. There’s a lot to navigate, from understanding plan types to exploring green energy options. Thankfully, you don’t have to do it on your own.
Choose Texas Power is a free, independent marketplace where you can compare Texas energy plans, including fixed-rate, variable-rate, and no-deposit electricity plans. Our resources will help you understand how deregulated energy works and sign up for the right plan for your budget. In this guide, we’ll cover everything you need to know to find the best energy plans in Texas.
The first step to picking the best electric plan in Texas is understanding the different types of energy plans. Although it can impact your electric rate, the plan type relates to more than cost alone — it also affects how predictable your rates will be over time.
Fixed: Fixed-rate electricity plans have set terms and rates for the duration of your contract. A fixed-rate plan is a good option if you prefer stability and don’t want to worry about fluctuating market prices. Because these plans include a contract, you’ll pay an early termination fee (ETF) if you cancel before your plan expires.
Variable: A variable-rate electricity plan provides less stability than a fixed-rate plan, as the rate you pay changes when wholesale energy costs fluctuate. Your plan’s stability (or instability) depends on its rate structure, but the main feature to remember is that the price you pay will change over time. The key advantage is that you can cancel a variable-rate plan anytime because there is no contract.
Indexed: Indexed plans are less common than the previous two, but you may still come across them. As with a variable-rate plan, the rates in an indexed plan can change over time. However, instead of calculating your rate based on the market value of electricity, your provider bases it on a commodity index. The range of variation depends on the formula your provider uses, so be sure to read the contract carefully before committing.
You may notice prepaid electricity plans mentioned often. Prepaid electricity plans differ from other plans in terms of when and how you pay your bill. Here’s how prepaid energy plans compare to postpaid plans.
Prepaid energy plans: Prepaid plans require you to pay for electricity before you use it. People often choose these plans because they want to stick to a budget and better predict their spending. With a prepaid energy plan, you will only pay for the electricity you use. These plans are also popular for customers who want to avoid paying a deposit before beginning service.
Having a prepaid plan doesn’t mean you’ll have a flat monthly electricity bill — you’ll still have to pay for what you use, which may increase during extreme temperatures. However, prepaid plans can help you exercise a little more control over your monthly energy costs.
If you choose a prepaid plan, it could be helpful to understand some of the nuances of its payment structure:
Postpaid energy plans: This is the most common payment choice for energy plans. Like many other energy bills, your provider will send you the invoice for the energy you’ve used at the end of the month. All Texas energy plans are postpaid unless they specifically state otherwise.
Bill credits: Bill credits are available on some Texas fixed-rate electricity plans as a reward for meeting a specific energy usage threshold in a month. For example, your provider may offer a reward if you use between 1,000 and 1,200 kilowatt-hours (kWh) in a month. This usage bucket is set in your contract and should not change. A plan with bill credits may be a good option if you know your energy consumption typically fits into the provider’s discounted usage bucket.
Another key component of energy plans is the rate structure. Rate structures can be confusing, as they use similar terminology to plan types. Think of rate structure as a category within the type of plan you choose. Not all types of plans offer all rate structures, and options are as follows:
Let’s explore how these rate structures function based on an example usage of 1,000 kWh. We’ll calculate supply charges — the amount you pay for your usage, not including taxes and fees.
Fixed rate electricity
While this rate structure uses the same terminology as a fixed-rate plan, not all fixed-rate plans have fixed rates. Ultimately, a fixed-rate electricity plan in Texas means a stable rate, where you pay the same amount for each kWh you use throughout your contract. This is the simplest rate structure.
Usage: 1,000 kWh
Fixed rate: 12.6¢/kWh
Supply charges: 1,000 x 12.6¢ = $126
Flat rate electricity
If you choose flat rate electricity in Texas, you are charged the same amount — within a certain range — regardless of how much energy you use. Your electric company will decide your rate based on your usage history and may charge extra if you exceed your average usage. You will also be charged the same amount if you consume less electricity than usual. Flat rate electricity doesn’t mean you’ll have a flat monthly electricity bill, as your total bill still depends on how much energy you use.
Usage: 1,000 kWh
Flat rate: $90 for 800–900 kWh, $30 overage fee
Supply charges: 1,000 kWh at $90 + $30 = $120
Tiered rate electricity
In a tiered rate structure, the energy company designates several usage buckets and charges differently for each one. Tiered rate energy plans can work in a few ways. For instance, you might pay a flat rate up to a certain usage level and a traditional rate per kWh after that, or you may pay a different rate for every usage bucket. For many residents, tiered rate energy plans are the most confusing rate structure.
Usage: 1,000 kWh
Tiered rate: 12.6¢/kWh up to 800 kWh, 14¢/kWh for 801–1,300 kWh, 9.3¢/kWh for 1,300+ kWh
Supply charges: (12.6¢ x 800) + (14¢ x 200) = $128.80
Time-of-use rate electricity
Time-of-use rates in Texas energy plans vary depending on the day or time. For example, some time-of-use electricity plans offer free electricity at night or on weekends. Electricity providers offer different rates for different times of the day or week to incentivize you to use less energy during peak-demand times or when more renewable energy is available. These time buckets stay the same for the duration of your contract. If you use most of your energy at night or on weekends, time-of-use rates can be an affordable option.
Usage: 400 kWh (weekday) + 600 kWh (weekend) = 1,000 kWh
Time-of-use rate: 12.6¢/kWh on weekdays and 8.2¢/kWh on weekends
Supply charges: (12.6¢ x 400) + (8.2¢ x 600) = $99.60
Variable rate electricity
Although they use the same terminology, not all variable-rate plans use a variable rate structure. A variable rate structure means your rate changes based on the status of the energy market. When demand is high, your rate is high. When demand is low, your rate is low.
Usually, this rate will fluctuate from month to month, depending on how your provider calculates it. The benefit of plans with variable rate structures is that they often don’t have early termination fees — you can switch plans when price spikes are imminent and hop from low rate to low rate. However, you risk being hit with high bills when you’re unable to dodge the price hikes. It’s also difficult to forecast your energy costs this way.
Usage: 1,000 kWh
Variable rate: 12.6¢/kWh in June and 16.8¢/kWh in July
Supply charges (June): 12.6¢ x 1,000 = $126
Supply charges (July): 16.8¢ x 1,000 = $168
Wholesale rate electricity
A wholesale rate structure is the riskiest of all plan and rate options. Wholesale rates are directly connected to the spot price of electricity, which can change minute by minute. That means the rate you pay for electricity can also change each minute.
The average customer would find it impossible to constantly monitor wholesale prices and turn off devices, lights, and HVAC systems whenever prices spike. When temperatures and prices jump in the summer, wholesale bills can add up to hundreds of dollars in a matter of days. For this reason, we do not list wholesale Texas energy plans in our marketplace, and many providers don’t offer wholesale rates to residential customers.
The final piece to understand when you compare energy plans is the length of the contract. The ideal contract length depends on your plans and preferences. Renters may choose shorter contracts to align with their lease, while homeowners may be comfortable committing for longer. Contracts are typically available in the following lengths:
A month-to-month structure is the most common option for variable-rate or indexed plans with variable rate structures because the price changes frequently. Beyond that, it primarily depends on when you want to shop for a plan. Three- and six-month plans require more effort than 24- to 36-month plans, but longer plans require a commitment to an electric company or a willingness to pay early termination fees if you change services sooner rather than later.
Whatever term length you choose, it is important to read the full contract before you commit. It will provide important details about what happens when your contract expires. At that time, you’ll often be enrolled at a higher rate unless you expressly switch to a different Texas energy plan or provider.
Choosing the best energy plan in Texas revolves around your energy needs, usage, and goals. If you’re hoping for a straightforward plan and predictable bills, a fixed-rate plan with a fixed rate structure may be the best option. If you desire flexibility, a variable-rate plan could be a good fit.
You should also consider the term length before signing a contract. An important note: you won’t have to pay a termination fee if you cancel your plan because you’re moving out of the provider’s service area, even if your contract hasn’t yet expired.
The Choose Texas Power marketplace can help you compare current Texas electricity rates and plans in your area. Enter your ZIP code to begin exploring today’s energy rates in Texas. If you find a plan that matches your needs, we can guide you through the signup process. You can also call the number on this page to discuss the best electricity plans in your area with one of our energy experts.
Buying electricity requires you to sift through a lot of information. However, a little research and due diligence can help you find an energy plan that fits your needs and budget.
Type of energy plan: Fixed-rate, variable-rate, or indexed, which can be prepaid or postpaid
Type of rate structure: Fixed, flat, tiered, time-of-use, variable, or wholesale
Length of contract: One, three, six, 12, 24, or 36 months
The most important part of choosing an energy plan is finding one you are comfortable with. If you’re unsure what you need or are having trouble sorting through the options, call the number on your screen. One of our team members can answer your questions, whether you’re searching for fixed-rate electricity, flat-rate energy plans in Texas, or plans powered by solar energy. Start exploring the best energy plans in Texas by entering your ZIP code on our marketplace.
Electricity rates vary by energy plan, provider, location, and time of year. There isn’t one type of energy plan that always has the cheapest rate. No-deposit and prepaid energy plans often have higher rates because they don’t require a deposit or a contract. Variable-rate plans may have a low rate when you first sign up, but your rate could spike if energy demand increases. Fixed-rate plans could offer a more expensive rate but provide stability and security during your contract term.
To avoid being surprised by extra fees, be sure to thoroughly review your plan’s Electricity Facts Label (EFL). The EFL includes information about your rate, base charges, fees from your utility company, and more. There isn’t one type of plan that includes hidden fees, but you should pay close attention to your rate if your plan includes bill credits. Some plans bake the bill credit into the advertised rate, so you’ll pay a higher rate if you don’t hit the usage threshold to qualify for the bill credit.
If your credit score is lower than the threshold set by a provider, you may have to pay a deposit to begin service. You won’t have to pay a deposit if your credit score exceeds the provider’s threshold or if you sign up for a no-deposit plan.
If you are late paying your energy bill, your provider may charge a late fee. Your service could also be disconnected if you are late multiple times or your account is past due for an extended period. Your provider should send you notice before disconnecting your service. If you are struggling to pay your energy bill, contact your provider to discuss whether you qualify for a deferred payment plan or bill assistance.
Fixed-rate plans or energy plans with a contract typically charge an ETF if you cancel your plan before your contract expires. Variable-rate and month-to-month plans normally don’t charge an ETF, so you can switch plans at any point without paying a fee.
Many types of energy plans can work well for apartment dwellers and renters. One important factor if you live in an apartment is your contract length. Some renters choose a contract with a term length matching their lease. That way, you avoid paying an ETF if you choose to move when your lease expires. Explore our guide to the best energy plans for apartments for more details.
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