Texas Electric Holdover Rates: How to Avoid Getting Zapped

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The Hidden Costs Driving Up Your Texas Electricity Bill

When Diane, a hard-working single mom from Houston, opened her electricity bill, she was stunned. Her monthly statement had skyrocketed from $120 to an eye-watering $185 – and she had no idea why. Diane felt frustrated, confused, and worried about how this unexpected expense would impact her tight budget.

Unfortunately, her story is all too common in Texas. Countless residents pay “holdover rates” without even realizing it. In this article, we’ll explain holdover rates, why they exist, and—most importantly—how to protect yourself from falling victim to this costly trap.

What Are Holdover Rates?

In the Texas electricity market, a holdover rate is a variable rate that your Retail Electricity Provider (REP) automatically applies to your account when your fixed-rate contract ends and you are in electricity limbo (i.e., between contracts).

These rates are inextricably tied to the real-time market price of electricity, which can fluctuate wildly and soar during high demand.

While holdover rates are legal, many Texans find this practice misleading and unfair, taking advantage of their busy lives and limited time.

Read: Texas Electricity Contract Expiration Guide →

Retail Electricity Providers

In the Lone Star State, power generators are paid for their electricity in an energy-only market. You (the consumer) don’t purchase electricity directly from power generators. Instead, you rely on a Retail Electricity Provider as an intermediary.

Your REP is tasked with forecasting demand and purchasing the right amount of electricity in advance, often through fixed-rate contracts, to meet projected needs. When your fixed-rate contract with your REP expires, and you haven’t chosen a new plan, you may unknowingly be placed on a holdover rate.

Read: How Electricity Contract Renewals Work in Texas →

The Holdover Rate Trap

For REPs, holdover rates safeguard against the uncertainty of not knowing how much electricity to purchase for customers whose contracts have expired. By switching these customers to a variable rate, REPs can adjust their purchases based on actual consumption, minimizing their risk of buying too much or too little power.

However, this risk-mitigation strategy comes at a steep cost for consumers, who are left exposed to the volatile whims of the real-time electricity market.

Your Electricity Plan

If you’ve ever been shocked by a sudden spike in your Texas electricity bill, you might be one of the many Texans who have been switched to a “holdover rate” without realizing it.

So, how can you tell if you’re on a holdover rate? Start by scrutinizing your latest electricity bill or logging into your REP’s online portal. Look for terms like “variable rate” or “month-to-month” in your plan details. Also, look for the contract expiration date. If your contract has expired, you’re likely on a holdover rate.

Read: How to Switch Electricity Companies in Texas →

Avoiding Holdover Rates

The good news is that you can take control of your electricity costs and avoid falling victim to holdover rates. To protect yourself from the financial burdens of holdover rates, start by marking your contract expiration date on your calendar and setting a reminder to begin shopping for a new plan at least a month in advance.

Better yet. Schedule a reminder now, and we’ll email you when it’s time to shop.

As your contract nears its end, dedicate time to researching and comparing plans from various REPs. Utilizing comparison tools, like those offered by ComparePower, can help you find the most competitive plan based on your unique usage patterns.

In Texas, you can switch electricity providers without incurring early termination fees within 14 days of your contract expiration date. 

Texas Administrative Code, Title 16, Part II, Chapter 25, Subchapter R, §25.475

Make your switch within this window to avoid being rolled onto a costly holdover rate. Repeat this process annually to ensure you always secure a competitive electric rate for your home.

Stuck in a contract? Schedule a reminder, and we’ll help you find a better plan before your contract expires.

How ComparePower Helps

We empower you (the Texas energy consumer) with the tools and information to make informed decisions and avoid costly pitfalls like holdover rates. ComparePower gives you access to:

Transparent pricing information: We offer all-inclusive pricing and break down the costs of each plan, including hidden fees and discounts, so that you can make apples-to-apples comparisons.
Personalized recommendations: Live Link™ analyzes your unique usage data to identify the plans that will save you the most money based on your electricity consumption.
Unbiased advice: As an independent marketplace, we’re not beholden to any particular electricity company. Our sole focus is helping you find the best plan for your needs and budget.
Step-by-step guidance: Our friendly Texas-based customer service team will walk you through the switching process and ensure a seamless transition to your new plan.
Reminders when it’s time to switch: ComparePower will remind you to switch plans at the right time.

Easy to use, helped me choose the right power plan for me.
Eric Eldridge

Say Goodbye to Holdover Rates

After reading about the shocking truth behind holdover rates and how to avoid them, you may wonder how to choose the best electricity provider in Texas.

Switching electricity providers is one of the easiest ways to save money on your energy bills in Texas. Don’t let holdover rates drain your wallet for another month. Start comparing plans today and take control of your energy costs with ComparePower.

Take Control of Your Energy Costs

The following article will guide you through selecting the best provider and plan for your home. You’ll learn:

The role of retail electricity providers and how they differ from utility companies
Why price should be the primary factor in choosing a provider
How to calculate the true cost of an electricity plan based on your usage
The difference between fixed-rate and variable-rate plans
How to use ComparePower’s tools to compare plans and find the best deal

With this knowledge, you can confidently shop for a new electricity plan and take control of your energy costs.

Read: How to Choose the Cheapest Electricity Provider in Texas →

Don’t spend another month overpaying for electricity. Take control of your energy costs today by comparing plans and making the switch with ComparePower.