Fixed vs Variable Electricity Rates in Texas: Which Saves More?

What Are Fixed-Rate Electricity Plans?

A fixed-rate electricity plan locks in your per-kWh energy charge for the entire length of your contract. Whether wholesale electricity prices spike during a July heat wave or drop to near zero on a mild spring night, your rate stays the same every single month.

Contract terms typically range from 3 to 36 months. Shorter contracts (3-6 months) tend to carry slightly higher rates, while longer commitments (24-36 months) often reward you with the lowest per-kWh price. The trade-off is flexibility: most fixed-rate plans include an early termination fee (ETF) ranging from $150 to $295 if you cancel before the term ends. Some providers waive the ETF if you are moving out of your service area, so always check the Electricity Facts Label (EFL) before signing.

Fixed-rate plans are by far the most popular choice in the Texas deregulated market, and for good reason: they let you budget with confidence and shield you from the extreme price swings that hit the ERCOT wholesale market every summer.

What Are Variable-Rate Electricity Plans?

Variable-rate plans have no contract. Your per-kWh rate adjusts every month based on wholesale electricity prices, natural gas costs, and your provider's pricing formula. When demand is low — think mild October evenings — rates can dip well below fixed-plan pricing. But when Texas air conditioners are running full blast in August, your rate can climb dramatically.

The biggest advantage is freedom: there are no cancellation fees and no commitment. You can switch to a different provider or plan at any time without penalty. Providers are required to notify you of rate changes, but the notice window is often short.

Variable plans make the most sense when you need electricity for a brief, defined period or when wholesale prices are seasonally low. They are a poor fit for anyone who needs predictable monthly bills.

Real Cost Comparison at 1,000 kWh/Month

Let's walk through what a full year actually looks like for each plan type at a typical Texas usage level of 1,000 kWh per month. We'll assume a fixed rate of 10¢/kWh and variable rates that follow a realistic seasonal pattern.

Monthly Breakdown

• January (Variable 7¢): Fixed = $100 | Variable = $70
• February (Variable 7¢): Fixed = $100 | Variable = $70
• March (Variable 8¢): Fixed = $100 | Variable = $80
• April (Variable 8.5¢): Fixed = $100 | Variable = $85
• May (Variable 11¢): Fixed = $100 | Variable = $110
• June (Variable 14¢): Fixed = $100 | Variable = $140
• July (Variable 18¢): Fixed = $100 | Variable = $180
• August (Variable 17¢): Fixed = $100 | Variable = $170
• September (Variable 13¢): Fixed = $100 | Variable = $130
• October (Variable 8¢): Fixed = $100 | Variable = $80
• November (Variable 7.5¢): Fixed = $100 | Variable = $75
• December (Variable 7¢): Fixed = $100 | Variable = $70

Annual Totals

• Fixed-rate annual cost: $1,200
• Variable-rate annual cost: $1,260
• Fixed-rate savings: approximately $60 per year in energy charges alone

The gap widens in hotter-than-average summers. During the record-setting 2023 Texas summer, some variable-rate customers saw bills exceed $250 for a single month at 1,000 kWh usage. In those extreme scenarios, a fixed plan can save $200 or more over the course of the year. The fixed plan's real value is not just the dollar savings — it's the elimination of bill shock during the months when your air conditioner runs around the clock.

When Should You Choose Fixed?

A fixed-rate plan is almost always the right call if any of the following apply:

• You need budget predictability. Families, retirees, and anyone on a set monthly budget benefit enormously from knowing exactly what the energy portion of their bill will be.
• You want summer protection. Texas summers are brutal and unpredictable. A fixed rate means July and August bills won't surprise you.
• You plan to stay at your address for 12 months or more. Longer contracts unlock the best rates, and you won't have to worry about the early termination fee.

For most Texas households, a 12-month fixed-rate plan signed in fall or early spring offers the best combination of low rates and manageable commitment. Shoppers in the Dallas-Fort Worth area and the Houston metro will find especially competitive fixed-rate options because those markets have the most providers competing for customers.

When Does Variable Make Sense?

Variable-rate plans earn their place in a few specific situations:

• Short-term rentals or temporary housing. If you're in a month-to-month lease or staying somewhere for only a few months, a variable plan avoids early termination fees entirely.
• You're about to move. If your move date is within two to three months, locking into a fixed contract just to pay a cancellation fee makes no financial sense.
• Winter-only usage (October through March). Wholesale prices in Texas are historically low from fall through early spring. A variable plan during these months can genuinely save money compared to a fixed rate — but you need to switch before summer arrives.

The Hybrid Strategy

Savvy Texas electricity shoppers use a hybrid approach that captures the best of both worlds:

1. Lock in a fixed-rate plan before summer. The best time to sign a fixed contract is March or April, before summer demand drives prices up. A 12-month term starting in spring carries you through the most expensive months at a predictable rate.
2. Consider a variable plan for mild months only. If your fixed contract expires in the fall, you could ride a variable plan through October to March when rates are naturally low, then lock in a new fixed plan the following spring.
3. Set calendar reminders. The hybrid strategy only works if you actively manage your plan transitions. Set a reminder 45-60 days before your contract expires so you have time to shop for the best renewal rate.

This approach requires a bit more attention than simply signing a 24-month fixed plan, but it can save an additional $50-$100 per year for customers willing to put in the effort.

How to Compare Fixed and Variable Plans

Comparing plan types effectively requires looking beyond the advertised rate. Here's what to check:

• Average price at your usage level. The Electricity Facts Label (EFL) shows rates at 500, 1,000, and 2,000 kWh. Make sure you compare at the level closest to your actual monthly consumption.
• Base charges and fees. Some plans advertise a low per-kWh rate but add a $10-$15 monthly base charge. Others fold the base charge into the rate. The only fair comparison is total monthly cost at your usage level.
• TDU delivery charges. These are the same regardless of plan type, but they add 4-5¢/kWh to your effective rate. Factor them in when estimating your real monthly cost.
• Contract terms and ETFs. Know what the early termination fee is before you commit, and confirm whether it's waived if you move.

Use PowerBot to compare both fixed and variable plans side-by-side, filtered to your ZIP code and actual usage level. The tool shows your estimated total monthly cost — including TDU fees — so you can make a true apples-to-apples comparison in minutes.

Ready to find your best rate? Create a free PowerBot account to get personalized AI recommendations based on your location, usage patterns, and budget preferences. Our engine analyzes hundreds of plans so you don't have to.