Understanding Early Termination Fees by Plan Type
Fixed-Rate Plans
Early termination fees almost always apply to fixed-rate plans, which come with contracts ranging from three months to 60 months. If you cancel a fixed-rate plan before your contract ends, you’ll generally owe a cancellation charge. The price will vary depending on the contract length and your selected energy provider.
While fixed-rate plans have cancellation fees, they also promise price predictability through steady rates regardless of changing market conditions. In return, providers use ETFs to bind the customer to the contract.
When comparing energy plan types, note that many types, such as bill credit plans, time-of-use plans and even green energy plans, also feature fixed rates. While you may enjoy the other features these plans offer, be aware that they typically include an ETF.
Variable-Rate Plans
Variable-rate plans, called month-to-month plans, have no contract, meaning you won’t owe an early termination fee if you switch providers or plans. Having no contract or cancellation fee allows you the flexibility to change plans whenever you see fit. However, this also means that your energy rates can — and often will — change on a monthly basis.
Prepaid Plans
Prepaid plans, often called “no-deposit lights” plans, offer customers a pay-as-you-go model for their electricity consumption. Some prepaid plans also feature variable rates, which means they have no contract or ETF. Other prepaid plans come with fixed rates and a contract, including an ETF. When signing up for a prepaid energy plan, carefully review the EFL to determine if you’ll owe an ETF for canceling your plan early.
How Early Termination Fees Are Calculated
Energy providers generally have a flat early termination fee. For most plans, the ETF ranges between $150 and $395 but can sometimes be higher or lower. Longer contracts, from 24 months to 60 months, often have higher ETFs — ranging from $295 to $395 — while 12-month contracts and shorter tend to have cheaper ETFs of around $150.
Instead of a flat fee, some providers charge an ETF based on the contract’s remaining months. For example, a customer may have to pay $20 multiplied by the remaining months in your contract.
Avoiding Early Termination Fees
You can be exempt from ETF in certain scenarios. Here’s a short list of the same:
- Moving to a new address: Regulations in Texas exempt electricity customers from early termination fees if they are moving to a new address. You will need to submit proof of the same when ending your contract.
- Canceling a contract close to its end date: If you cancel your energy plan up to 14 days before the contract’s end date, you do not need to pay an ETF.
- Choosing a variable-rate plan: If enrolled in a variable-rate plan, you have no fixed-duration contract with the provider and are exempt from any early termination charges.
While ETFs are designed to encourage you to stick with your current contract, you may find it worth paying the cancellation fee if you can secure a lower rate per kilowatt-hour. Switching energy providers can be an effective method of lowering your monthly energy costs.
We suggest comparing electricity rates to see what prices are available. You may find that if you can secure enough savings through a new energy plan, it may be worth paying the ETF to enjoy lower energy rates.
Frequently Asked Questions About Cancellation Fees
Yes, all electricity providers charge early termination fees on all their fixed-rate plans. However, providers do not charge ETF on variable-rate plans and most prepaid plans. Note that Payless Power offers prepaid energy plans with fixed rates, so its plans include cancellation charges. However, its ETFs are only $99 whether you choose the six-month or 12-month plans.
If you are moving to a new address and your existing provider does not serve there, you must choose a new energy provider. Fortunately, Texas law protects you from owing any cancellation charges when moving outside of your provider’s service area. When moving to a new utility service territory, you’ll have to select a new energy plan — even if your current provider operates in that area.
Are you leaving your current home but your roommates staying put? You can transfer your electricity account to the person staying in the home. However, that may not be the best choice. Another option is to cancel your service — you won’t owe an ETF because you’re relocating — and the resident can compare plans and providers to find a new energy plan for their home.
Yes, state law regulates early termination fees. The Public Utilities Commission (PUCT) makes it mandatory for all providers to specify their plans’ ETF on the electricity facts label (EFL).
