When it comes to choosing your electricity plan in a deregulated market, it’s unlikely that you’ll have a shortage of products and options available. Many retail energy providers in the Texas market offer a variety of products, including fixed-rate and variable-rate plans.
Let’s take a closer look at how these types of plans compare so that you can make the best choice for your household.
Fixed- vs. Variable-Rate Electricity Plans
Here’s a quick summary chart comparing fixed- and variable-rate electricity plans to make their differences easier to understand.
| Feature | Fixed Rate | Variable Rate |
| Price Stability | ✅ Locked-in rate | ❌ Fluctuates with market |
| Monthly Bill Predictability | ✅ Consistent | ❌ Can vary significantly |
| Potential for Savings | ✅ Can be cheaper when the market is up | ✅ Can be cheaper when the market is low |
| Protection from Market Spikes | ✅ Rates remain constant throughout plan term | ❌ Exposed to price surges |
| Flexibility | ❌ Often long-term contracts of 12+ months | ✅ Often month-to-month contracts |
| Best | Budget-conscious households | Price-savvy, low-usage users comfortable with risk |
What Are Fixed-Rate Electricity Plans?
Fixed-rate electricity plans keep the same energy rates for the entire contract period. Going with a fixed-rate plan offers you protection from market price volatility. In an unexpected energy crisis, such as when severe weather strikes, you won’t have to worry about electricity rate increases for the length of your contract. Your plan isn’t affected by changes in commodity prices, so choosing a fixed-rate electricity plan can really pay off.
What Are Variable-Rate Electricity Plans?
Variable-rate electricity plans mirror the current market rates. As a result, they expose consumers to market price volatility—the speed at which energy prices can change in response to supply and demand. This means that choosing a variable-rate plan could be ideal when energy rates are either stable or expected to decrease.
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How to Choose the Right Electricity Rate Plan
If you’re thinking about switching electricity plans or providers, analyze the following to choose the best plan for your needs.
Consider Your Energy Habits
Texas energy providers offer a mix of plans for different users. Knowing your energy habits can help you identify which plans might save you the most money. For example, a plan offering free daytime electricity might be great for remote workers, while a high-usage plan might be the cheapest for large homes or households.
Factor in Market Volatility
Texas energy prices can soar during extreme weather events, but also fall significantly during other times of the year. If you’re comfortable with the risk of market swings, you could potentially save more with a variable-rate plan than a fixed-rate one when the market is low.
Contract Terms & Fees
Fixed-rate plans typically have contracts of 12 to 60 months and early termination fees if you cancel before your term ends. If you don’t want to be locked into a provider or plan, variable-rate plans might be a better option, since they’re often month-to-month.
Learn more about how to read electricity facts labels, which state the type of plan (fixed or variable) a given plan is.
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Variable vs. Fixed-Rate Electricity FAQs
What is a fixed-rate electricity plan?
Fixed-rate electricity plans maintain the same electricity rates per kWh for the plan’s contract length, such as 12 months.
How does a variable-rate electricity plan work?
Variable-rate electricity plans have per-kWh rates that vary from month to month based on market conditions.
Which is better: fixed or variable electricity rate?
Fixed-rate electricity might work better for people who want predictable electric bills and who plan to live in a place long-term. Variable-rate electricity can be a fit for people who value flexibility and want to take advantage of energy savings when the market is down.
When is the best time to switch electricity plans?
Generally, the best time to start a new service or plan is when your contract ends to avoid early termination fees. However, you can begin shopping around earlier.
Can I switch from variable to fixed rate anytime?
Most likely. Variable-rate plans are usually month-to-month contracts, so you can change to a fixed-rate plan at any time.
When to Switch Electricity Plans
If you have a variable-rate plan, you can likely switch electricity plans at any time without worrying about early termination fees.
If you have a fixed-rate plan, you can start looking at other plans one to two months before your contract expires. However, be sure to schedule your new service start date close to, or on, the date your plan ends. You can check your plan’s specific rules to see the earliest you can switch without paying cancellation fees.