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Variable Electricity Rates in Texas
In the dynamic landscape of the Texas electricity market, you have many choices when it comes to powering your home.
Among these options, variable-rate electricity plans have emerged as a potentially attractive choice for those seeking flexibility and the opportunity to capitalize on market fluctuations.
However, before diving in, it’s crucial to understand the intricacies of these plans and weigh the potential benefits against the risks.
Table of Contents
What are Variable-Rate Electricity Plans?
Variable-rate electricity plans are pricing structures in which the cost per kilowatt-hour (kWh) of electricity can fluctuate based on market conditions, such as wholesale prices, weather patterns, and supply and demand.
Unlike fixed-rate plans, which offer a stable price for the duration of a contract, variable-rate plans are subject to change.
Here’s a quick comparison of the key features of variable-rate and fixed-rate plans:
| Feature | Variable-Rate Plans | Fixed-Rate Plans |
|---|---|---|
| Price per kWh | Fluctuates with market conditions | Remains constant throughout the contract |
| Contract length | Month-to-month | Typically 6, 12, or 24 months |
| Risk of price spikes | High | Low |
The Potential Benefits of Variable Rates
The primary draw of variable-rate plans is their flexibility. With no long-term contracts or early termination fees, consumers can switch plans or providers when market conditions change.
This flexibility can particularly appeal to those uncertain about their long-term electricity needs, such as those who need temporary living arrangements.
Read: Month-to-Month Electricity Plans in Texas
The Risks Associated with Variable Rates
When wholesale electricity prices spike due to extreme weather events, supply disruptions, or unexpected demand surges, consumers on variable-rate plans can face high bills.
During the February 2021 winter storm in Texas, many consumers on variable-rate plans faced exorbitant electricity bills due to the sudden spike in wholesale prices.
Some customers reported bills exceeding $1,000 for just a few days of electricity use, highlighting the potential risks of these plans.
This price volatility can make budgeting for electricity costs challenging and result in financial hardship for those unprepared for sudden rate increases.
Recent Changes in the Texas Electricity Market
In the wake of the February 2021 winter storm, the Texas Legislature has taken steps to protect consumers from the risks associated with wholesale-indexed variable-rate plans.
House Bill 16, approved by both chambers, bans residential and small-business electricity customers from signing up for plans that directly pass wholesale electricity prices to customers.
This legislative change and the lessons learned from Griddy Energy underscore the importance of understanding the risks associated with variable-rate plans and the need for strong consumer protections in the Texas electricity market.
Is a Variable-Rate Plan Right for You?
Choosing a variable-rate electricity plan depends on your circumstances, risk tolerance, and willingness to manage your energy costs actively.
Consider your budget, energy usage, and market savvy before choosing.
If you accept the risks and actively manage your electricity costs, a variable-rate plan like the TXU Energy Month-to-Month Flex Forward plan may be viable.
This plan offers a low monthly rate with no long-term contract or cancellation fees, allowing you to change plans without penalty.
Enter your zip code, then click ‘All Plans’ to find and enroll in the TXU Energy Month-to-Month Flex Forward plan.
Why Fixed-Rate Plans are Recommended for Most Households
Fixed-rate electricity plans offer most Texas households the best combination of price stability, predictability, and consumer protection.
By locking in a set price per kWh for the duration of your contract, you can avoid the risk of unexpectedly high bills due to market volatility and make budgeting for your electricity costs more manageable.
While variable-rate plans can offer potential savings during low market prices, the risks associated with these plans often outweigh the benefits for the average consumer.
In light of recent market changes and the increasing focus on consumer protection, it is strongly recommended that most Texans choose fixed-rate plans to minimize their exposure to price fluctuations.
Read: Fixed vs. Variable Rate Electricity: Which is Better?
How to Choose Your Best Electricity Plan in Texas
Choosing the best electricity plan for your needs involves understanding your energy consumption patterns, priorities, and risk tolerance.
To make an informed decision, follow these steps:
- Understand your energy consumption patterns and priorities.
- Use ComparePower, a highly-rated energy marketplace, to compare plans and providers.
- Take advantage of ComparePower’s usage-based shopping tools to find plans that align with your energy needs.
- Shop with your usage history to get personalized plan recommendations.
- Consider contract length, renewable energy content, and additional features.
- Easily enroll in your chosen plan online through ComparePower.
Following the step-by-step guide in this article, you can save hundreds of dollars a year on your electricity bills and avoid the risks associated with variable-rate plans.
Read: How to Choose the Best Electricity Plan in Texas
Find the Best Energy Plan for Your Home
Don’t let the complexity of the Texas electricity market keep you from finding the best energy plan for your home.
Enter your zip code to get personalized recommendations and transparent pricing information so you can make an informed decision about your home’s electricity.
Call us at 855-441-3030 Monday through Friday, 8:30 a.m. to 6:30 p.m., or Saturday, 9:00 a.m. to 4:30 p.m.
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