Choosing Electricity Plans in Texas

Four Types of Electric Rate Plans in Texas 

When comparing electricity plans in Dallas, Houston and all other deregulated cities, you will notice there are four main types of contracts: fixed rate, variable rate, wholesale or market rate, and prepaid. By understanding the differences between them, you can choose the cheapest energy price for your house or apartment.

When choosing electricity plans in Texas, the main features to consider are flexibility and contract conditions. Among the two contract arrangements that establish a minimum time period, the fixed rate contract delivers savings if the market price increases, and the indexed rate contract delivers savings if the market price decreases.

The following table summarizes the advantages of disadvantages of each contract type, so you can consider them when browsing through the electric service options in Texas.

Fixed Rate Electric Plans

With this type of residential electric service contract, you are charged the same electricity rate for its entire duration. However, you are still subject to changes in transmission, distribution and regulatory fees. A fixed rate offers predictability, but there is a penalty for cancelling the contract before the agreed term.

• The best recommendation is monitoring fixed rate contracts regularly, and selecting one when prices are low on average.
• Another way to get the lowest kWh rate in Texas, is by selecting a longer term contract, for example 24 or 36 months instead of 12.
• Best high usage energy plans

The market price of electricity may drop below your fixed rate in the winter months, when demand is low. However, you will also avoid the high summer tariffs, when demand increases due to air conditioning in homes and businesses.

The main disadvantage of a fixed rate plan is paying a penalty if you switch your electricity provider before the contract ends. However, this is not an issue if you choose carefully – don’t get locked into a fixed rate contract when prices are high. You can carry out some quick web research on electricity price predictions; a fixed rate contract is great if prices are expected to increase, but may be counterproductive if there is a price decrease.

If your consumption is high enough to take advantage of the lowest electricity rates in Houston or Dallas-Fort Worth, a fixed rate contract is a smart choice. Quick Electricity features a wide variety of fixed rate energy plans for Texans.

Variable Rate Electricity Plans 

With a variable rate, your kWh price changes every month according to market price variations, or at the discretion of your retail electricity provider. As a result, the kilowatt-hour price charged to you can increase or decrease unpredictably each month. However, you are not required to purchase electricity for a minimum term, and can switch to another provider without penalties.

Electricity prices in Texas are determined by supply and demand. As a consequence, variable rate plans are expensive during summer, when demand reaches its peak. However, you will also save on power bills during winter, when demand is low.

A variable rate contract is recommended if you want the flexibility to switch your energy provider at any time. You can take advantage of this flexibility by keeping track of the best electricity rates available in Houston or Dallas-Fort Worth. However, you can expect hefty power bills during summer if you stay with an unfavorable contract.

Prepaid Electricity Plans

As their name implies, these electricity plans are paid upfront, and energy consumption is charged from your balance. A prepaid energy plan can have any of the pricing methods discussed above. For example, Payless Power offers the SmarTricity Premier 12 Prepaid Plan, which comes with a fixed rate for 12 months.

The benefits of electricity plans depend on the provider, and checking the Electricity Facts Label carefully is recommended. For example, some prepaid plans offer discounts for keeping your cash balance above a certain value.

Prepaid electricity plans also have a psychological benefit. Since energy is paid first and used later, homeowners tend to monitor their consumption better. On the other hand, it’s easy to forget about consumption when you are charged later. Prepaid electricity can be compared to using money from a savings account, while other electricity plans are like using a credit card.

Indexed or Market Rate Electricity Plans

The electricity price also varies in this contract type, but using a predetermined formula and not at the discretion of the electricity provider. For example, when market prices drop, providers with market rate contracts are under the obligation to reduce their prices. This is not the case for variable rate plans.

Like a fixed rate contract, a market rate contract will normally have a minimum term, and there is a penalty for early termination. This type of contract can be beneficial if electricity prices are expected to decrease. However, energy rates in Texas continue to climb due to natural gas prices. 

What Is a Wholesale Electricity Plan?

A wholesale electricity plan is another type of energy contract, but it can be very risky. The electricity provider normally charges a fixed monthly fee plus all legally required charges, and the wholesale kWh price is transferred directly. Purchasing electricity with no markup may seem like a good deal, but consider that the wholesale market is very volatile.

Texas has a price limit of $9,000 per megawatt-hour in the wholesale market, and this threshold has been reached during summer. This translates into $9/kWh for the end user, which is around 80 times higher than the average price for homeowners. Texan homes have an average electricity bill of around $130 per month, but a wholesale electricity plan can charge you this amount in just a few summer days. 

Selecting the Best Texas Electricity Plans

Take a look the Most Popular Electricity Plans in Texas, according to our energy experts. Our data comes straight from current Electricity Facts Labels (EFLs) that are updated monthly.

Want a long term plan? We recommend Frontier Utilities. Frontier has a variety of electricity plans to choose from. Don’t want a contract? Try the ever-popular month to month option from Payless Power. No credit check!