8 Things
to Consider
- Looking for a new Texas electricity plan and the lowest electricity rates?
- There are 8 crucial things to consider to get a great energy rate from the best electric companies, avoiding costly bill surprises.
- These tips are often overlooked without the help of an expert, but worry not, we’re here to help.
The Texas Electricity Plan That’s Exactly Right for You
There are hundreds of electricity plans in Texas and electricity rates at various usage levels. It’s overwhelming to figure out which energy plans are a good fit for your home, which are gimmicks that set you up for a painful bill shock, and which electric companies are trustworthy.
Follow these steps and you’ll be shopping like a pro in no time.
Where to start
Are you moving into a home and need a new plan, or switching energy plans for your current home?
A Switching:
If you’re switching plans for your current home before your contract end date expires, beware of Early Termination Fees (called ETFs).
The Electricity Facts Label (EFL) associated with each plan discloses the fee you’ll pay if you cancel early. If you find a plan with a much lower rate than you’re paying now, you may come out ahead by paying the ETF and switching, but do the math first. By waiting to switch until the final 14 days of your contract, you can avoid the fee.
You can usually enroll in a plan weeks or months before the start date to secure the plan at the advertised rate at that time.
B Move-in:
If you’re moving into a home, you’ll provide your move-in date during the enrollment process. You can often get an expedited date if needed.
If it’s a new-build home, be sure to speak with the area’s transmission and distribution utility company (TDU) to make sure the meter hookups are ready when you move in, and that you have an ESID number for your new address, which the energy provider will need when you enroll in a plan.
Moving into an apartment or condo? Ask the landlord if you’re responsible for lining up electricity or if they manage energy purchases.
C Move-out:
If you’re terminating your electricity plan before your contract end date because you’re moving away, there’s generally no Early Termination Fee.
When moving to an area that your current provider services, they’ll often happily move your contract to your new address without any charge.
What’s your home’s energy usage?
The price you pay for electricity will depend on your energy usage.
In the EFL for each plan, you’ll see different price points based on average monthly usage levels of 500, 1,000 and 2,000 kilowatt hours (kWh). See sample above. Visit Smart Meter Texas to access your home’s historical electricity usage.
A monthly usage level of 500 kWh may be for an apartment or condo, 1,000 kWh for a small to mid-size house, and 2,000+ kWh for a larger home.
There’s no one-size fits all when selecting an energy plan
Providers often design plans to provide optimum pricing for a certain usage range, so it’s important to select the correct plan based on your expected kWh consumption. If you choose a plan that doesn’t fit your home, you’ll pay much more than necessary and risk major bill surprises.
Estimate your future energy consumption based on your prior 12 months of usage
Estimate your future energy consumption based on your prior 12-month usage. You should review usage over an entire year due to seasonal fluctuations, understanding peaks and valleys to select the best plan for your home.
You can likely automatically pull up your historic usage from your utility company at SmartMeterTexas.com. While you’re at it, calculate the average rate you actually paid for the last year.
Since factors like weather and insulation influence your home’s usage level, you can’t predict exactly what your future usage will be, but historic usage is a good indicator.
What month are you switching?
Rates are often higher in the hot summer months because electricity demand significantly increases
If you decide to enroll in a long-term fixed rate plan in summer, you could be locking in pricing at peak levels.
Many homeowners have found that enrolling in long-term fixed-rate plans in late winter or early spring months is a good strategy to gain a lower rate for the term of your contract.
Due to market supply-demand imbalances, it’s possible that this trend won’t always hold true, but the odds are good that locking in a rate during low demand periods will save you money.
If your current fixed-rate plan ends in summer, consider enrolling in a shorter plan (like a 6-month plan) that ends in late winter or early spring. Then, you can enroll in a 12, 24, 36 or 60-month plan to lock in a rate when prices are often lower.
If your plan already renews in a late winter or early spring month, be careful about enrolling in a partial-year plan that may have an attractive rate, but which has a contract end date in late spring.
Providers often offer partial-year or short term electricity plans in Texas with very attractive rates that end just before summer, but after they expire, homeowners then have to enroll in a new plan in a warm-weather month when rates may be high.
What are your needs and your risk tolerance?
Do you have a strict monthly electricity budget?
If so, consider a fixed-rate contract when you choose an energy plan so you can better predict your bill. You’ll see a filter on the our homepage that allows you to view only plans with more predictable bills.
To try getting the lowest rate for each period of the year, are you willing to monitor and research “no contract” month-to-month plans constantly?
Some homeowners who don’t mind the hassle of continuously shopping for electricity rates decide to enroll in variable-rate plans that offer low introductory pricing for the first one to three months, but then increase significantly, and the customer must research the market again for a new plan. If that’s not you, a competitive fixed-rate plan may best fit your needs.
Variable-rate plans are more likely to result in bill surprises because TX energy rates can change monthly and homeowners may forget to monitor pricing. However, if you only need electricity for a few months during a transition, such a plan may be a reasonable choice, depending on whether the energy provider will inform you in advance of any rate increases so that you can exit the plan promptly without an Early Termination Tee.
Would you rather go to bed at night knowing what your electricity rate will be for a long term, or can you stomach the volatility and high risk of an index rate that floats with the market, and potentially delivers a better average rate over a year?
Most homeowners elect to lock in a fixed rate, but if you wish to take a chance to get a lower average rate, be sure to carefully consider the risk of large bill surprises, especially in the summer months and winter freezes. Some customers experience bills in the thousands of dollars because they take the risk of enrolling in indexed “wholesale price plans” which have rates that float daily with the market.
Index-rate plans do not offer the ability to lock in protection against rate spikes, and we strongly discourage enrolling in these plans. We don’t offer index plans on Home Energy Club.
Many Texans have become accustomed to locking in multi-year fixed rates when pricing is at cyclical lows, protecting them against rate spikes and gradual increases in rates that occur during market cycles.
Choose your term length
Define your preferred length term
Long Term (12, 24, 36 and 60 months)
- Good for homeowners
- Offer greater stability
- Ability to lock in low prices
Short Term
- Good for renters
- Offer greater flexibility
- Tailor-made to your lifestyle
Choose your rate type
Fixed Rate
With a fixed rate plan, you pay a fixed rate for the term of your contract
Pros
- 6 months
- 12 months
- 24 months
- 36 months
Cons
- Best time to enroll in a fixed-rate plan for a lower rate is late winter or early spring, after winter peak and before summer peak
Great for those who:
Variable Rate (Flex Rate)
With a variable rate plan, the rate you pay will fluctuate based on the market price of electricity and the discretion of the provider.
Market prices are influenced by factors you can’t control such as:
- Weather
- Demand
- Commodity fuel prices that drive generation costs
- Generation plant and distribution system issues
- Decisions by providers to hike prices
Your electricity bill will fluctuate month to month due to price changes, even if your energy usage stays the same
Pros
Cons
Great for those who:
Market Rate (Indexed)
With an indexed rate plan, your rate is associated with an underlying market variable disclosed in your contract, like a publicly-traded energy commodity index that tracks the price of gas
The rate can change monthly, daily or even multiple times per day for “wholesale price plans” which track the commodity index
Pros
Cons
- Natural gas or other energy commodity prices
- Weather
- Demand for commodities
Great for those who:
Beware of “too good to be true” offers
Free Nights and Weekends
These plans are created to incentivize you with “free” electricity during off-peak hours
They help power companies control power outages and maintain equal energy usage throughout the day
These types of plans can be good for some, like homeowners who consume a certain percentage of their electricity during nights and weekends, and during specific time periods during the week
The Catch:
These plans may have longer contract periods and higher cancellation fees, and can create bill surprises depending on your energy usage patterns
Tiered Rates Based On kWh Usage
These plans generally offer a fixed amount of kWh per month at a very low price
If you go over or under the defined kWh per month, you’ll likely end up paying very high rates
The Catch:
- If you use over 1,000 kWh, you can end up paying a large fee for the month
- If you use less than 1,000 kWh, your effective rate may be very high
- In gimmick plans that are extremely onerous, you can end up paying a large fee if you don’t use exactly 1,000 kWh in a month
Bill Credits
These plans offer bill credits if you stay within a certain range of kWh usage during your monthly billing cycle. The rate associated with the target usage range can be attractive, but it may be difficult to predict if you’ll stay within the range in a given month due to weather extremes.
The Catch:
1. Consider a plan with the following specifications from an actual bill credit plan:
- Energy rate of 11.85 cents/kWh
- Utility delivery charge of $5.47 per month plus 4.11 cents/kWh
- Bill credit for $75 if you use between 1,000 and 1,999 kWh
2. In the following scenario:
- A company offers a $75 credit if you use between 1,000 and 1,999 kWh in a month, and the energy and utility charges shown above apply. The rates per kWh would be:
– 500 kWh usage: 17.1 cents (very high rate)– 1,000 kWh usage: 9.0 cents (good rate)
– 2,000 usage: 16.2 cents (very high rate)
- You would need to stay between 1,000 and 1,999 kWh in a month to benefit from bill credit and get a good rate
Avoid bill surprises
To avoid surprises in your monthly bill, consider the following:
- Energy providers and plans on Home Energy Club, which have been vetted to help you avoid billing surprises, allowing you to find the best energy rates in Texas. Avoid websites like Power to Choose Texas, which the state legislature has considered shutting down due to quality control issues causing massive numbers of bill surprises due to gimmicky energy plans.
- Provider’s Better Business Bureau rating (see the BBB ratings on our Texas Electric Company Reviews page)
- Provider’s reviews, satisfaction surveys, complaints and scam scandals online:
- Note that customers taking the time to review electricity companies often do so only if they have a complaint, and not a good experience
- On the other hand, be aware that some providers have been known to “game” their star ratings and online reviews, especially smaller providers
- Read and understand the Electricity Facts Label (EFL) for each plan, and especially note the pricing variables and fees. Electric plans in Houston (serviced by Centerpoint) and electric plans in Dallas (serviced by Oncor) have different TDU charges, and will thus have different rates for the same plans. The same holds true for Texas cities in other zones, depending on which TDU services the area.
- The Terms of Service
COMPARE
Your real cost to the average retail cost of energy in your area of Texas, or compare with your neighbors.
DON’T let your contract expire before having a new energy plan
- Retail electric providers are required to notify customers at least 30 days before a contract expires
- You can terminate a contract without incurring an Early Termination Fee within 14 days of the expiration date
- If you take no action in response to the notice, your retail energy provider will serve a month-to-month plan, which is usually significantly more expensive than your fixed contract rate
DON’T let your contract expire in summer when rates are highest
- To avoid summer expiration dates, choose a partial-year contract and get on a contract cycle when rates are lower
Congratulations!
You’re now a master energy shopper. If you’re still having trouble finding the best energy plan for you, visit us at Home Energy Club. We offer special discount rates from top providers, vetting each plan with TrustPlan™ to make sure it’s “gimmick free”. We do the homework, so you don’t have to!
As a last but very important piece of advice, remember:
Don’t let your contract expire without renewing or switching to avoid a rate spike
Fixed rate plans are less likely to cause billing surprises
Beware of gimmick plans with rates that are too good to be true
Visit us at Home Energy Club for discount plans you can trust
