In the Texas deregulated energy market, you have the power to choose your electric company and energy plan. To find the best electricity rates in Texas for your needs, you should select the electricity plan that fits your budget, usage and lifestyle.
Whether you prefer predictability, flexibility or convenience, there are many options to consider. The Public Utility Commission of Texas (PUCT) shows over 140 plans in Dallas and Houston, with rates ranging from 11 to 17 cents per kilowatt-hour (kWh). But because of deregulation, picking the right energy plan isn’t just about spotting the lowest advertised rate per kWh and signing up. Choosing the right plan requires careful attention to detail.
“Read the fine print. If it looks too good to be true, it probably is,” warned Fox Swim, solar policy researcher at Aurora Solar.
Why Are There Different Energy Plan Types?
When Texas deregulated the energy market in 2002, it created energy choice, allowing Texans to pick their energy provider. The competition created by the free market led to the creation of a variety of plan types to meet the needs of different lifestyles or preferences. In Texas, you can choose from several plan types, including:
- Fixed-rate plans
- Variable-rate plans
- Prepaid plans
- Green energy plans
Regulated markets do not have these options. Residents in cities like Austin and San Antonio have to rely on a single municipal utility company for their energy.
The plan type you pick will depend on your needs and preferences. For example, you might prefer the stability of a fixed-rate plan, while your neighbor may want the flexibility of a month-to-month plan or the chance to pay upfront with a prepaid plan. Other plans provide the best rate at high usage levels for very large homes, while some plans provide discounted rates at 500 kWh, making them ideal for apartment dwellers.
To determine which plan is best for your energy needs, be sure to read its electricity facts label (EFL). The EFL is a state-mandated document that details plan information, such as the rate per kilowatt-hour, additional charges, early termination fees (ETF) and green energy content.
Fixed-Rate Plans
Fixed-rate electricity plans charge a flat rate for every kilowatt-hour of energy you use. Throughout seasons of high and low demand, your rate stays the same. Plans with fixed rates protect you from market fluctuations and rate spikes while providing predictable billing.
However, your contract means you can’t take advantage of low rates when prices drop. Additionally, you’ll have a contract that you must abide by for three to 36 months. You may cancel your contract early, but you’ll likely owe an ETF.
Fixed-rate energy plans are best if you want peace of mind about your electricity costs. If you have a tighter budget or live in an area with extreme weather, fixed rates provide consistency to help manage your expenses. Fixed rates also allow you to secure a stable rate that can help you save over time if energy prices increase, which may be ideal if you’re planning on being in the same home for an extended period.
What Is a Good Fixed Rate for Electricity?
The average electricity rate in Texas is 15.61 cents per kWh as of December 2024, which is approximately 13.5% lower than the national average of 16.94 cents per kWh, according to October 2024 data from the U.S. Energy Information Administration (EIA). You can use this average to compare and determine if your rate is competitive or if you’re overpaying.
The lowest rate in your area depends on location. In Dallas and Fort Worth, the lowest rate is around 10.5 cents per kWh, while Houston is 11 cents per kWh. You should also consider other details that impact total cost, such as cancellation fees and incentives like bill credits. Some fixed-rate plans offer bill credits if your energy usage is above or below a set usage level, typically 1,000 or 2,000 kWh. These account credits may offset your cost when you qualify for the discount. However, in months where you don’t qualify for the discount, your effective energy rate can be as much as double the advertised price per kilowatt-hour.
Variable-Rate Plans
With a variable-rate energy plan, you don’t have a long-term contract, and your rate changes every month based on market prices and conditions. This plan type is often called a month-to-month plan. Rates increase when demand rises and decrease when demand is low. Variable-rate electricity plans typically don’t have long-term contracts, so you can switch plans and electricity providers at any time without incurring any cancellation fees.
You can potentially benefit from cheaper rates during low-demand periods. However, your rates are not guaranteed. The energy market is unpredictable, meaning rates can spike and cause more expensive bills. Because variable rates are so unpredictable, we typically only recommend variable-rate plans as a short-term energy solution.
Swim said, “Variable rates can be very dangerous because there’s no cap on how high the electricity rate can go. If your budget is flexible and you are okay with the uncertainty, variable rates may be a good fit. However, if you prefer to budget and pay consistent bills, consider fixed rates instead.”
Prepaid Energy Plans
Prepaid electricity plans mean you pay upfront for electricity instead of paying a bill at the end of the month. You load money into your account, and as you use energy, your light company will deduct the cost of power from your account.
This plan type requires near-constant usage monitoring. If your account balance dips below a certain point, you’ll receive a disconnection warning. And your electric company may disconnect your energy if your account zeroes out. If you sign up for a prepaid energy plan, track your balance and add more funds regularly to avoid a disconnection.
Prepaid plans are an attractive no-deposit option, but we recommend comparing prices with fixed-rate options before signing a contract. Payless Power is a great energy provider for those searching for no-deposit lights or prepaid energy.
Are Prepaid Electricity Plans a Good Option in Texas?
A prepaid plan might be a good fit if you have low credit or want no-deposit electricity, but it’s not the best option to save money on energy. No-deposit plans typically come with slightly higher average rates because providers take on more risk by not charging a deposit, which can make them potentially more expensive over time.
If you’re enrolling in a no-deposit lights plan, we recommend Payless Power. It’s our top pick for prepaid energy plans with no deposit.
Green Energy Plans
Green energy plans can reduce your carbon footprint by offsetting your electricity usage with renewable sources like wind or solar power. Providers such as Gexa Energy, Green Mountain Energy, Rhythm Energy and Chariot Energy offer 100% renewable energy plans. Many other energy companies in Texas offer a few 100% green energy plans, while some only offer plans with a percentage of renewable energy.
You can find an exact renewable percentage listed on your plan’s EFL, but the average in Texas is 33.3%, according to recent EFLs we’ve reviewed.
Time-of-Use Plans
Time-of-use rate plans charge different rates for electricity depending on when you use it. These plans typically have lower rates — or even “free” energy — during off-peak hours. These discounted periods are typically at night or over the weekend when demand is lower. Rates rise during peak hours, usually in the late afternoon and early evening, when most people consume more electricity. Reliant Energy and TXU Energy both offer time-of-use plans.
When enrolled in a time-of-use plan, you’ll still have to pay the utility delivery charge during the “free” periods, meaning your energy is never truly free. Additionally, providers tend to charge very high rates during the paid periods to offset the loss of the $0 energy charge times.
These plans may benefit those who can shift their energy use to off-peak times. For example, running your dishwasher or washing machine late at night can save money by taking advantage of the lower rates.
However, most Texans won’t be able to offset their energy usage enough to truly maximize their savings in this plan type. Savings are hard to achieve because the peak-demand periods of late afternoon and early evening are typically when your air conditioning units will run the most. Even if you change when you use most of your appliances, your air conditioning unit could still be costing you.
How Do Tiered-Rate Plans Work?
Tiered-rate plans split your usage into blocks (or tiers), and each has a specific rate. These are very similar to bill credit plans in that you’ll receive a discounted rate per kilowatt-hour when your usage meets or exceeds a specific usage level. The tier at which your rate changes will vary from plan to plan.
For example, Reliant’s Get More, Save More 36 plan charges a higher rate when your usage is below 1,000 kWh. When your usage exceeds 1,000 kWh, you’ll receive a two-cent discount per kWh.
TXU Energy’s Saver’s Discount 12 plan charges three different rate tiers. It charges a high rate per kWh below 1,200 kWh. If your usage exceeds 1,200 kWh, you’ll get a 50% discount. However, if your usage then exceeds 2,000 kWh, your rate will be even higher than the initial charge per kWh.
Tiered rates can be confusing, leading to unpredictable monthly energy bills. Seasonal changes can also impact your usage, making it tough to consistently take advantage of discounts throughout the year. If your energy usage varies seasonally, you could end up with much higher rates on a tiered-rate plan. To avoid unexpected costs, we recommend a fixed-rate plan with stable rates regardless of usage.
The actual costs vary by energy supplier and location. You can determine the cost of each tier detailed in your plan’s EFL so you won’t be surprised when your bill arrives. We don’t usually recommend tiered-rate plans because of the inherent unpredictability of this plan type. Fixed-rate plans with no tricks or confusing rate structures often provide the most predictable energy bills and have competitive rates.
Flat Rate Plans
A flat rate plan means you pay the same price every month, regardless of your energy usage. The main benefit of this pricing structure is that it reduces concerns about fluctuating energy costs throughout the year. Your provider bases the cost of this plan on an estimated average usage, which may serve as a way to save money for those with high or varying usage. If your usage is lower than average, it could result in more expensive payments than if you choose a fixed-rate plan.
Not all electric companies in Texas offer flat-rate plans. Your location and current or historical energy usage determine your eligibility.
Learn more: Average electricity bills in the U.S.
What Type of Electricity Plan is Best?
We recommend straightforward fixed-rate plans for predictable bills and protection from market fluctuations. By paying a set rate per kilowatt-hour, you know what to expect each month.
That said, the best energy plan type for you depends on your energy usage and budget. When shopping for the best electricity plan, consider what you value most. Knowing your priorities can help you narrow options and compare plans.
Review a plan’s rate range across all usage levels in the EFL. A plan with a large rate range (10 cents to 22 cents) from 500 kWh to 2,000 kWh is less predictable. A plan with a smaller rate range (13 cents to 16 cents) should provide more predictable energy bills.
“Take a look at what your current electricity bills are and do some math. Figure out your cost and how much you use per month. When you multiply the numbers, you’ll get an idea of your monthly costs so you can budget or know what the new rate will mean for your budget,” said Swim.
You can enter your ZIP code to compare options in your area. Filter energy plans by your priorities, from green energy to bill predictability. Be sure to shop for energy plans at the kilowatt-hour usage level that matches your needs: 500, 1,000 or 2,000 kWh.
Frequently Asked Questions About Types of Energy Plans
What’s the difference between fixed-rate and variable-rate plans?
Fixed-rate plans offer a consistent rate per kWh of energy you use for the length of your contract. Variable rates change monthly based on market conditions and do not require a contract. Fixed rates provide a more stable and predictable monthly bill compared to variable rates.
Can I switch energy plans if I’m not satisfied with my current one?
You can switch energy plans at any time, but you might have to pay an early termination fee (ETF). The cost usually ranges from $150–$395 or $20 per remaining month on your contract. You can find your exact fee listed on your current plan’s EFL.
Are green energy plans more expensive than traditional plans in Texas?
No, electricity prices for green energy plans are not more expensive than traditional plans. Many green energy companies, such as Gexa Energy and Rhythm Energy, offer renewable electricity plans that are as cheap as — if not cheaper than — traditionally sourced energy. That said, it depends on your location and provider choice. While Gexa offers some of the cheapest 100% renewable energy, green energy plans from TXU Energy may be more expensive.
What is an indexed plan?
An indexed plan — often called a market rate plan — is like a variable-rate plan with even more rate fluctuation. Indexed rates are tied directly to a market index. The rate charged per kilowatt-hour can — and will — change at any given time throughout the day. This plan has become infamous in Texas for the extreme price hikes it caused during Winter Storm Uri in February 2021. Since that time, the PUCT has disallowed the use of indexed plans to protect Texans from being exposed directly to the whims of the market.
