Month-to-month electricity plans allow you to avoid a long-term contract while keeping your lights turned on in Texas. While fixed-rate contracts typically last one to three years and feature fixed rates, month-to-month plans often have variable rates that fluctuate based on market conditions, such as increased demand, season and the price of natural gas.
The pricing structure of month-to-month plans can vary significantly. While they occasionally offer low initial rates, they almost inevitably lead to high costs in the long run.
Depending on your financial situation and plans to move or change providers, a month-to-month contract may be best for your needs. A fixed-rate, long-term plan can provide price stability, while a shorter, month-to-month plan might suit those who want to avoid a long-term contract.
Understanding Month-To-Month Electricity Plans
Month-to-month electricity plans in Texas allow consumers to sign up for an electricity plan without signing a long-term contract. This plan type typically doesn’t include any large upfront deposits or expensive early termination fees (ETFs).
That said, these plans also have variable rates that change on a monthly basis. With each new month, you’ll pay a new rate per kilowatt-hour that increases or decreases based on market conditions. Month-to-month rates may occasionally be cheaper than fixed-rate plans. However, rates almost certainly increase, especially in seasons with increased demand, such as summer and winter.
While we don’t usually recommend month-to-month plans, they could be beneficial for specific short-term needs. If you’re living in a temporary residence and only need power for a brief period, for example, a month-to-month plan may suffice. You may also want to consider a month-to-month plan if you need a new light plan but want to avoid locking in a long-term contract while rates are high. However, we recommend avoiding a variable-rate, month-to-month plan for lengthy periods, as rates almost inevitably lead to bill surprises and high energy costs.
How Do Month-To-Month Energy Plans Work?
In Texas, month-to-month energy plans typically operate on a 30-day billing cycle, where the provider bills you at the end of each month for the electricity used. Rates on these plans can change based on market conditions, and providers can adjust pricing at any time. However, providers generally inform customers of any changes in writing before a rate increase. Energy providers must also clearly disclose any fees, terms and conditions involved with your plan to help you understand and calculate your monthly bills.
While consumers can switch providers without penalty under month-to-month plans, you should be aware that electricity rates can fluctuate seasonally, especially during periods of high demand, such as summer and winter. If you choose to sign up for a month-to-month energy plan, you’ll need to pay close attention to notifications from your light company to stay on top of any price changes.
Are Month-To-Month Electricity Plans More Expensive?
Generally speaking, month-to-month plans tend to be more expensive. Because month-to-month plans typically have variable rates, their prices change monthly. While this may lead to low rates during periods of high demand, variable rates tend to still have higher rates than fixed-rate plans. Additionally, rates can — and often do — increase based on market conditions.
Fixed-rate plans provide price predictability and stability, which can be more cost-effective, especially if you live in areas with extreme seasonal variations. On the other hand, month-to-month plans might cost less if market prices are very low. However, you’ll want to pay close attention to market rates to keep abreast of any imminent changes in energy costs. Otherwise, you may end up paying very high rates for your variable-rate plan.
Consider your typical energy usage, the provider’s fee structure and the timing of rate changes to determine which plan offers the best value for your needs.
Pros and Cons of Month-To-Month Electricity Plans
Month-to-month energy plans can suit certain needs and budgets but may not be right for all Texas residents.
Pros
- Flexibility to switch at any time
- No early termination fees (ETFs)
Cons
- Fluctuating rates
- Unpredictable monthly bills
- Subject to market volatility
- Potential for higher long-term costs
- Fewer benefits and incentives
No-Deposit Month-To-Month Options
Many month-to-month energy plans don’t require deposits because they don’t have a long-term contract. Having no deposit makes them an attractive option for those who want to avoid a large upfront payment or who have less-than-ideal credit histories.
However, some providers may still require a credit check or charge a deposit. If you’re looking specifically for no-deposit lights, we recommend Payless Power.
Understanding No-Deposit Qualifications
Many light companies will provide no-deposit energy for traditional energy plans if you meet certain credit requirements, which is why electric companies perform a credit check during your sign-up process. However, you should note that light companies typically require a very high credit score for you to secure no-deposit lights. Don’t worry; deposits are typically refundable after 12 months of on-time payments.
Additionally, you may be able to request a deposit waiver if you’re a veteran, over 65 years of age, are a victim of abuse or have a qualifying medical condition.
Before enrolling in any plans, we recommend reviewing a plan’s terms and conditions.
When Month-To-Month Plans Work Best
Overall, we recommend you enroll in transparent fixed-rate plans for 12 months or longer. These plans tend to charge more competitive rates and provide protection from market increases. However, certain situations may merit considering a month-to-month option, particularly if you’re looking for a short-term energy solution.
Below, we break down who might benefit from month-to-month plans.
Best-Fit Scenarios
Month-to-month plans may suit consumers in transitional situations, such as renters, people planning to move soon, or those planning to switch light companies soon. Since these are temporary arrangements, it’s best not to be locked into a long-term commitment and face ETFs if you cancel your contract early.
Timing Considerations
Timing also matters when considering enrolling in month-to-month plans. You may benefit from low rates and bills during periods of low demand or mild weather, such as during the spring or fall months in Texas. However, you may pay excessively high rates during the summer or winter when extreme weather leads to increased demand.
Choosing Between Contract Lengths
Energy plans can range from month-to-month plans to contracts for up to 60 months, leaving you with a big decision upon enrollment. When evaluating different contract lengths, consider personal factors such as your living situation, energy usage patterns and long-term plans.
For instance, if you’re renting or planning to move within a few months, a month-to-month plan may suit you since it offers flexibility without penalty fees for canceling early. On the other hand, if you’re a homeowner and plan on staying put for some time, a fixed-rate plan will offer stability with locked-in rates and predictable bills.
Carefully weighing these situations and factors, such as flexibility, budget and living arrangement, will help you determine the best contract length for your specific needs.
The following table breaks down different scenarios with the most suitable energy contract lengths:
| Consumer Situation | Best Contract Length | Why It Works | Key Considerations |
|---|---|---|---|
| Renting for six months or less | Three to six months or month-to-month | Short-term contracts offer price protection, while month-to-month plans offer the flexibility to change at any time | Short-term contracts may offer savings but require re-upping often. Month-to-month plans lead to unpredictable bills |
| Homeowners | Fixed-rate plans for 12 to 36 months | This plan type offers price stability and predictable monthly bills | Long-term contracts can result in ETFs if canceled early |
| Poor credit or no credit history | No-deposit plan | Avoids deposit requirements | Potential for higher rates |
| Moving during low-demand periods | Fixed-Rate for 12 to 36 months | Locks in a low rate for long periods | Fixed pricing shields against market volatility but may include ETFs |
| Short-term temporary living | Month-to-Month | Offers short-term service without commitment | May lead to high rates and unpredictable bills but avoids a long-term contract |
Frequently Asked Questions About Month-To-Month Electricity
Can I switch from a month-to-month plan to a long-term contract?
Yes, you can switch from a month-to-month plan to a long-term contract at any time. To do so, contact your retail electric provider (REP) to review available plans and make the switch. Before enrolling in any plan, thoroughly review the terms and conditions to ensure it fits your needs and budget. Because month-to-month plans have no long-term contract, you can also switch energy providers without penalty. We recommend comparing fixed-rate energy plans from a range of providers to make a well-informed decision.
Do month-to-month plans always cost more than long-term contracts?
No, month-to-month plans don’t always cost more than long-term contracts. They may offer low rates during times of low demand, such as spring and fall. However, month-to-month plans have variable rates that often increase with little to no warning. Because they can lead to unpredictable monthly energy costs, we almost never recommend this plan type.
What happens to my rate after a long-term contract expires?
When a long-term contract expires, your provider will typically automatically transfer you to a holdover plan with variable rates. These rates are typically very high and can lead to bill surprises. As your contract end date approaches, review your options and consider renewing your contract or switching providers to avoid getting stuck in a holdover energy plan.
How much notice do I need to give to cancel a month-to-month plan?
Most energy providers do not require advance notice before canceling a month-to-month plan. You should be able to contact your provider to cancel without any penalties or fees.
