Picking an energy plan in Texas can feel overwhelming. Because Texas is a deregulated energy market, you’ll find a huge number of energy companies and electricity plans available. And electricity prices can range from as low as 10 cents per kilowatt-hour (kWh) to 24 cents per kWh and higher. Choosing the right energy plan can make or break your energy budget.
So, what is an energy plan? In Texas, light companies, such as Reliant Energy or Gexa Energy, purchase electricity in wholesale auctions. They then sell that power to you in the form of a contract with a fee per kilowatt-hour, delivery charges, contract length and other terms of service.
While some plans offer straightforward, easy-to-understand rates, others use deceptive discounts to advertise low rates that cause bill confusion. The free market caused by deregulation also causes rates to fluctuate based on supply and demand, fuel source costs, and even extreme weather events in Texas. All of this means that while you have the power to choose your energy plan in Texas, doing so can be challenging. We’ll break down the pitfalls and perks of energy plan shopping to help you find the best plan for your Texas home.
What To Consider Before Picking an Energy Plan
Before shopping for an energy plan, you’ll want to take a few steps to prepare. We recommend starting by assessing your energy usage patterns.
Your Energy Usage
Review past energy bills to determine your average monthly usage. If your home has a smart meter, you can pull your precise historic usage data using Smart Meter Texas. Knowing how much energy you use is critical because energy plans advertise average rates at the following key usage levels: 500 kWh for apartments and small homes, 1,000 kWh for mid-sized homes and 2,000 kWh for large homes.
While some plans offer discounted rates between 1,000 and 1,999 kWh, other plans are designed for apartment renters and offer the best rates for 500 kWh. Meanwhile, other plans feature deep discounts for large homes, with savings when your usage is consistently above 2,000 kWh a month and prohibitively high rates below that usage level. Meanwhile, other plans offer time-of-use discounts, with cheap rates during off-peak hours.
Knowing how much energy your home regularly consumes and when will help you identify the ideal plan for how and when you consume energy.
What Kind of Energy Do You Need?
If you need an electric energy plan, pay attention to plan type, which can include fixed rate, prepaid, time-of-use, bill credit, and more. If you’re concerned about price fluctuations, a fixed-rate plan locks in a consistent rate for the duration of your contract, providing predictability. On the other hand, you can avoid a long-term contract through a variable-rate plan. Assess your energy needs before selecting your energy plan.
If you’re shopping for commercial electricity in Texas, you still have the power of choice. And because of the increased energy usage associated with commercial energy, you’ll typically enjoy lower rates. Commercial energy plans also tend to be more straightforward, which can simplify the shopping process. Additionally, you can often work with the electricity provider to secure a custom quote for your business energy needs.
In Texas, you may need to set up gas or electricity for your residential or commercial energy needs. While many homes in Texas use gas for heating, cooking and water heating, note that gas is regulated in Texas. You can only get gas service from the local gas utility company that operates in your area.
Check Your Current Contract, If You Have One
If you’re switching electricity providers, review your electricity facts label (EFL) to make sure you’re not liable for any early termination fees (ETFs). The EFL is a state-mandated document that outlines the details of your electricity plan, including the rate, contract terms and additional fees. If you owe an ETF, compare it to any potential savings you may secure with your new energy plan. In some cases, if the savings are significant enough, it may be worth paying the ETF to enjoy lower monthly energy costs. Also, note that some light companies may even help you cover the cost of your cancellation fee to help you switch plans.
How To Pick the Best Energy Plan for You
After assessing your energy usage needs and checking your current contract for cancellation charges, you’ll be ready to compare energy plans. It starts with knowing about the different plan types.
Energy Plan Types
To offer the most competitive energy rates, electricity companies have created a wide range of plan types.
Fixed-Rate Plans
Fixed-rate plans offer a fixed price per kilowatt-hour throughout your contract, protecting you from market fluctuations and unexpected price spikes. We recommend a 12-month plan for more flexibility, as you can switch providers if you find a better option at the end of the term. Cancelling before the end of the contract could result in termination fees, which can cost as much as $395.
Bill Credit Plans
Plans with bill credits offer credits or discounts if you use a certain amount of kilowatt-hours in a billing cycle. You can secure lower bills if your home’s usage consistently meets the bill credit requirements. However, if your usage falls below or rises above the required usage threshold, your energy rate can skyrocket. We usually don’t recommend these plans, as your energy use can vary, and you may not qualify for the credit each month.
Time-of-Use Plans
Time-of-use plans charge rates that differ depending on the time of day or the day of the week, offering lower prices during off-peak hours. While these plans charge discounted rates or even offer free energy during off-peak times, they tend to charge very high rates during peak-demand periods to offset said discounts.
Green Energy Plans
Green energy plans provide electricity sourced from 100% renewable energy sources, such as wind, solar, hydro and biomass power. Green energy plans offer competitive electricity rates and can help you reduce your home’s carbon footprint. Green Mountain Energy, Gexa Energy and Rhythm Energy are top-rated green energy companies.
No-Deposit Plans
Also referred to as prepaid energy plans, no-deposit plans let you start service without paying a deposit or dealing with a credit check. You prepay for electricity before you use it, which may help you budget for your energy expenses. However, these plans tend to charge higher rates than traditional postpaid energy plans. Payless Power is our top pick for no-deposit lights.
Month-To-Month Plans
Variable-rate, or month-to-month plans, charge rates that change each month based on market conditions. These plans may be affordable when demand is low but more often charge high energy rates, particularly when demand increases. We almost never recommend this plan type.
Indexed Plans
After Winter Storm Uri in 2021, the Public Utility Commission of Texas (PUCT) banned indexed-rate energy plans. These plans tied the energy rate per kilowatt-hour to a specific market index, so rates change by the second based on real-time market pricing. The extreme demand issues caused by Winter Storm Uri caused indexed rates to spike to unheard-of levels, costing Texans millions. To protect consumers, the PUCT no longer allows this plan type.
Comparing Energy Rates and Pricing
When comparing energy rates in Texas, we suggest looking beyond the advertised rate or the “average price per kWh.” This number includes the energy charge and utility delivery fees. However, it may also include assumed discounts, such as bill credits, tiered rates or even time-of-use savings. However, your usage may not always qualify you for those savings, which can make this rate misleading. We suggest reviewing the base charge, energy charge and delivery fees in the EFL to see what charges combine to create the advertised rate.
You can also review the average price per kWh across all usage levels to see how much an energy plan’s rate may vary based on changes in your energy usage. If a plan’s rate varies significantly from 1,000 kWh to 500 kWh, that energy plan may cause unpredictable energy bills. On the other hand, if the rate only varies by a few cents per kilowatt-hour from the lowest usage level to the highest, that plan should be more predictable — even with large seasonal swings in your energy usage.
Watch Out for Hidden Costs and Fees
When choosing an energy plan in Texas, watch out for hidden fees and gimmicks that might cost you more in the long run. Hidden charges can negatively impact your monthly bill and add unexpected costs over time. Be sure to read the fine print, or EFL, of your plan to understand how these fees might affect you.
Common hidden fees to look out for include:
- Minimum usage fees: Charged if your monthly usage falls below a specified threshold, even if you’re using less energy
- Early termination fees (ETFs): A fee imposed if you cancel your contract before the agreed end date
- Late payment penalties: A charge for failing to pay your bill by the due date
- Connection/disconnection fees: Fees for connecting or disconnecting service, sometimes applicable when switching providers or moving
- Paper billing fees: An additional charge for receiving paper copies of your bill instead of going paperless
- Security deposit: A refundable deposit based on your credit history
- Base charge: A flat monthly fee many providers levy on top of the energy charge
Pick Your Term Length
Aside from the rate, one of the most important things to consider when signing up for an energy plan is the contract length. The term length of your contract can impact energy rates. Some providers offer deeply discounted rates on three, six and nine-month contracts, while others offer slight discounts on 24 and 36-month terms.
Also, consider when the contract may expire. For example, if you sign up for an ultra-cheap nine-month energy plan in September, you may enjoy low rates in fall, winter and spring. However, you’ll have to sign up again in the summertime when rates are historically at their highest.
Meanwhile, month-to-month plans tend to have rates that start high and increase based on monthly demand. Unless you need a short-term energy solution, we almost never recommend month-to-month plans.
Finding Your Perfect Plan Match
If you’re looking for an energy plan, start by taking stock of your energy needs. Look to see how much energy you use and at what time of day. This way, you have a clear understanding of what type of plan best fits your lifestyle.
After you do this, look at the providers in your area. Narrow down the plans available to you based on their type and your usage patterns. Look at the table below to see which types of plans make the most sense for you, and then narrow down your remaining choices based on price, provider reputation, and plan structure that make sense for your needs.
| Household Type | Typical Usage Pattern | Recommended Plan | Key Benefits |
|---|---|---|---|
| Small (1–2 people) | Low energy usage | Fixed-rate plan | Many fixed-rate plans offer cheap rates for low energy usage. |
| Medium (3–4 people) | Moderate energy usage | Fixed-rate plan | Fixed-rate plans provide customers with a high level of bill predictability and are cheaper if they use an average or above-average amount of energy. |
| Large (4+ people) | High energy usage | High-used fixed-rate plan | Many fixed-rate plans offer savings for high-usage homes, some with bill credits that unlock at 2,000 kWh and above. |
| Eco-Conscious | Varies | Green energy plan | Green plans allow you to source your energy from renewable sources and take advantage of benefits like solar panels, tax breaks, rebates and more. |
| Frequent Movers | Varies | Short-term fixed-rate plan | You may secure low rates on short-term contracts. |
Tips for Making the Switch
Switching energy providers in Texas can be straightforward if you keep in mind a few considerations to ensure a smooth transition. Once you’ve chosen your new energy provider, confirm that they can meet your move-in or switch date to avoid gaps (or overlaps) in service. It’s important to initiate the switch at least 1-2 weeks in advance to allow for processing time, and make sure you read through the fine print to avoid any unexpected fees or changes in terms.
Practical steps for switching energy plans:
- Review your current contract to check for early termination fees or other obligations before switching.
- Choose your new provider at least 2 weeks in advance.
- Contact your new provider to set your desired start date, ensuring it aligns with your current provider’s billing cycle.
- Confirm cancellation details with your old provider to avoid being charged for overlapping service periods.
- Monitor your bills for the first few months after switching to ensure you’re paying the correct rate.
- Set up reminders for future renewals to avoid getting stuck with a holdover plan that charges high variable rates.
Frequently Asked Questions About Picking Your Energy Plan
How long does it take to switch energy providers in Texas?
Switching energy providers in Texas typically takes between 3 to 7 days but can take up to 3 weeks if your home needs a new meter needs installed. Other factors that might affect your timeline include whether you’re switching to a plan with a different provider, the type of plan you choose, and any administrative processes. Regardless, your energy delivery should continue uninterrupted.
What happens if I move before my energy contract expires?
When moving, you may have the option to transfer your current energy plan to your new home. However, if you’re relocating to a different utility service area, you’ll have to select a new energy plan. Fortunately, you won’t owe an ETF if you have to cancel your current energy plan due to a move.
Can I switch providers if I have a past-due balance?
If you have a past-due balance, your current provider may require you to settle the amount before allowing you to switch to a new provider. Oftentimes, you may have a switch-hold placed on your account, preventing you from changing providers until you pay your balance in full.
What is the difference between a retail electric provider and a utility company?
In the Texas deregulated energy market, a retail electric provider (REP) purchases energy from generators and sells it to you in the form of an energy plan. A utility company, also called a transmission and distribution utility (TDU), manages the local power grid, delivering energy to homes and businesses across the state.
