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Which is better: Fixed-rate or variable-rate electricity?
Those who have lived in Texas for more than a year may recall when winter storm Uri hit the state over Valentine’s Day weekend in 2021.
Millions of people in Texas were left without power by a storm that brought freezing temperatures and widespread outages, causing billions of dollars in damage.
Texas residents enrolled in variable-rate electricity plans, such as Griddy (now out of business), had rates increase by as much as an eye-popping 18,000 percent.
These large bills were tough during the recession, primarily affecting low-income Texans.
There were reports of bills as high as $10,000, which could bankrupt households already struggling financially due to the pandemic.
However, Texans with fixed-rate contracts did not have to pay hefty electricity bills. Their fixed-rate contracts protected them from changing market conditions.
Winter storm Uri highlighted the importance of fixed-rate energy plans in Texas.
Enroll today! Fixed-rate plans are as low as $0.09 per kilowatt-hour (kWh) on ComparePower.
What is a fixed-rate electricity plan?
Fixed-rate plans have fixed terms and are typically 3, 6, 12, 24, or 36 months. You sign a contract with your electricity provider to get a fixed rate.
Most Texas households have fixed-rate electricity plans which offer stable, predictable pricing.
You will need to sign and commit to a contract, but you pay a fixed rate that does not change or fluctuate with market conditions.
A fixed-rate energy plan does not mean your electric bill will always be the same. You still pay per kilowatt-hour.
The total kilowatt-hours you use, the rate you pay for that energy, and additional fees from the utility will determine your monthly bill.
The benefits of fixed-rate energy plans
The benefit of a fixed-rate plan is peace of mind and predictability of your future electricity bills.
The drawback is that you are committed to staying with your electricity company for the remainder of your contract term.
Even if market prices drop, you will not be able to take advantage as you’ll be locked in a contract with your provider.
While this may seem like a burden, most Texans enjoy the peace of mind with fixed-rate contracts.
Fixed-rate electricity plans
These live rates for ONCOR ELECTRIC DELIVERY COMPANY service area were updated on . Pricing shown is based on an exact usage of 1000 kWh.
What is a variable-rate electricity plan?
Variable-rate plans can change with weather and market conditions and are tied to the fluctuating price energy providers pay to buy electricity from power generators.
Variable-rate plans can be enticing because they offer cheaper power when the state’s electricity supply is abundant but are more expensive when demand is high.
Some households with variable-rate plans may not even realize they are being billed on a variable rate.
Consumers are often switched to variable-rate plans by retail energy providers when their fixed-rate contracts expire.
Check your electricity bill for your contract end date. If your contract has lapsed, it’s time to shop for a new rate.
Learn how electricity contract renewals work in Texas.
Benefits of variable-rate energy plans
Variable-rate plans do not require a contract, so you are not locked into a long-term commitment.
The disadvantage of a variable rate electricity plan is that the rate can vary from month to month according to market conditions.
Plans with variable rates are best suited to consumers who need electricity on a short-term basis or understand the associated risks.
Indexed rate
Then there are indexed electric plans.
These are on a monthly or term basis with a rate calculated by a formula (which they will gladly share with you), with the base being the public index or other publicly available information.
If your rate is indexed to, say, the price of natural gas (which it often is), then it will go up and down following the cost of natural gas.
The formulas the companies use to determine your rate are simple themselves, such as this one from a major REP where the price of a kilowatt-hour is:
[ Natural Gas Price ] x [ Seasonal Factor ]
+ Energy Charge
+ [ (Monthly charge + Monthly TDSP Meter Surcharge) ] / [Monthly bill kWh Use]
As you have undoubtedly noticed, that whole “dependant on the price of natural gas” thing can sour you on the whole deal.
During heatwaves or cold fronts, customers on indexed plans can see their energy price double and even triple, wiping out the great savings they’d enjoyed up to that point.
Is a fixed-rate or variable-rate plan right for you?
Although variable-rate plans seem enticing, do your homework before you choose a variable-rate plan over a fixed rate for electricity service.
Variable rates always carry some level of risk. Understanding the risk, you’re taking is critical when dealing with variable-rate energy plans.
Our recommendation is to choose a fixed-rate plan to avoid the uncertainty of variable-rate plans.
Choose a variable rate for short-term power needs or if you do not want to be locked into a contract. But be aware that the cost may fluctuate significantly from month to month.
Switching electricity rates
Check the expiration date on your electricity bill. If your contract has lapsed, you need to switch energy providers, as you are leaving money on the table.
We’ll show you how to make an informed decision about choosing the best energy plan for your home.
Learn how to switch energy providers to get a lower rate in Texas.
New home electricity rates
Moving into a new home and need to set up electric service?
Estimating your anticipated monthly usage is the best way to shop for an energy plan in Texas.
This online electricity usage calculator will help you estimate your new home’s approximate energy usage to make an informed decision.
Green renewable electricity rates
By choosing renewable energy, you’re also making a statement to use 100% clean electricity to power your home.
Commit to using clean, renewable energy in your own life with a green electricity rate.
Find the best green energy plans on ComparePower.
Apartment electricity rates
Have proof of service for your leasing office or landlord instantly.
You will need an electricity account number before moving into your apartment in Texas.
Your landlord or leasing office requires proof of service before your move-in date.
Enroll for electric service with ComparePower and have proof of service in minutes.
Learn how to shop apartment electricity rates.
High bill? Find a lower rate
Is your electricity bill too high? You’re not alone if you’re confused by Texas’s different energy companies and electricity plans.
Don’t overpay for electricity when you can put that money in your bank.
Learn how to avoid how electricity bills in Texas.
Fixed & variable electricity rate FAQs
What causes variable electricity rates to change?
Variable-rate plans can change with weather and market conditions and are tied to the fluctuating price energy providers pay to buy electricity from power generators.
If I choose a variable rate, will my electricity bill increase?
Variable rates can vary from month to month according to market conditions. There is no guarantee that your rate will stay the same each month, so your bill can change.
Should the size of my house/apartment influence my electricity plan choice?
Yes, electricity is priced by the kilowatt-hour. Larger homes use more energy than smaller ones. When looking for an electricity rate, you need to know how much electricity you use.
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