How Texas electricity plans actually work

Texas has retail choice and a disclosure regime that, in theory, makes plans comparable. In practice the comparability depends on reading a document almost nobody opens. Here is what is in it.

Rate types: Fixed, variable, indexed, time-of-use
The key document: The Electricity Facts Label (EFL)
Never shoppable: TDU delivery charges and taxes
Cancellation window: Three business days after enrolling

Every plan sold in Texas comes with an Electricity Facts Label — a one-page standardised disclosure. Everything that determines what you actually pay is on it. Almost nothing that determines what you actually pay is in the advertisement.

The four rate types

Fixed rate

Your energy charge stays the same for the contract term. Your bill still varies with usage, and delivery charges can still change if the utility's regulated rates are adjusted, but the supply price you signed for holds. This is what most households and most small businesses should be on, because the value is budget certainty rather than being clever about the market.

Variable rate

The provider may change your rate month to month with notice. Variable rates are where expired contracts land you automatically, and they move up most sharply in exactly the months you use most. There are very few situations in which a household should deliberately choose one.

Indexed

Your price is tied by a published formula to a wholesale index — typically a natural gas index or an ERCOT settlement price. This is a legitimate product for a business with the tolerance to absorb monthly variation and the discipline to watch the market. It is not a household product, and the 2021 winter storm demonstrated what the tail risk looks like when it arrives.

Time-of-use

Different prices at different hours: free nights, free weekends, cheap overnight windows. The free hours are always paid for in the priced hours, so the plan is good only if your household's actual consumption pattern is genuinely concentrated in the free window. A home with someone working in it during the day is usually worse off.

Reading the Electricity Facts Label

Five fields decide almost everything:

Average price per kWh at 500, 1,000 and 2,000 kWh. Three points on a curve. If those three numbers are far apart, the plan has a structure — credits or tiers — that behaves very differently at different usage levels. A flat set of three numbers is a simple plan.
Rate type and term length. What it is and how long it holds.
Early termination fee. What leaving costs. Check this before you sign, not when you want to leave.
Recurring charges. Base monthly charges, minimum usage fees, and any credit structure with its threshold spelled out.
Whether the price includes TDU charges. Some labels quote all-in, some quote energy only. Comparing one of each is comparing nothing.

The two structures that cause the most surprise

Bill credits. A fixed dollar credit applied only when monthly usage crosses a threshold, usually 1,000 kWh. Above it the plan looks superb. Below it the credit vanishes and the underlying rate is often well above market. Houston's mild spring and autumn are when households fall below.

Minimum usage fees. A flat charge in any month below a threshold. On a small bill this is proportionally severe, which is why apartments are so often mismatched to plans designed for houses.

What is on the bill that no plan changes

Your delivery charges belong to CenterPoint Energy and are set under regulated tariffs. Every Houston customer on the same tariff pays the same delivery rates regardless of provider. Taxes are set by statute. Neither is shoppable, and any offer to reduce "your bill" by a percentage should be read with that in mind.

Expiry is the expensive part

The most costly thing in the Texas retail market is not choosing a slightly worse plan. It is letting a good one expire without noticing and sitting on a month-to-month default rate for a year. Providers must send expiry notices; they arrive amid everything else and are easy to miss. Diary your end date the day you sign.

Plan questions

What is an Electricity Facts Label?

A standardised disclosure document every Texas retail provider must publish for every plan. It shows the average price at 500, 1,000 and 2,000 kWh a month, the rate type, the contract term, the early termination fee and any recurring charges. It is the only document that tells you what a plan really does, and almost nobody reads it.

Why does my average price change when my usage changes?

Because most plans mix a fixed monthly charge, a per-kWh energy charge, the utility’s delivery charges and sometimes a usage-based credit. Spread the fixed elements over fewer kWh and the average price per kWh rises. That is arithmetic, not a trick — but plans with large credits at particular thresholds exaggerate it dramatically.

Is a fixed rate always safer than variable?

For a household, almost always yes. A fixed rate holds your supply price for the term. A variable rate can be changed monthly with notice, and in Texas it rises hardest in the months you use most. The main risk of a fixed plan is being locked in if the market falls, which for most households is a smaller problem than the reverse.

What is a TDU delivery charge and why is it on my bill?

It is what CenterPoint Energy charges to carry electricity to your meter and read it. It is regulated, filed with the Public Utility Commission, and identical for every customer on the same tariff regardless of retail provider. Your supplier collects it and passes it through.

What happens if my contract expires and I do nothing?

You move to a month-to-month default rate, which is typically the most expensive product your provider offers and can change every month. Providers must notify you before the term ends. Those notices are easy to miss, and missing one is the most common way Texas households start overpaying.

Have someone read the label before you sign

We read what you are on now, take it to the providers we hold agreements with, and tell you whether it is worth moving. If it is not, we say so.

Get a read on my plan Call 832-573-8546

No cost, no obligation. Monday–Friday, 8:00am–6:00pm CT.