Texas Power Plans: Fixed-Rate, Variable-rate, or Indexed

Prior to 2002, electricity plans in Texas fell into one of three categories: the electric company’s way, the way the electric company wanted it, and whatever the electric company said.

After deregulation, the Public Utility Commission of Texas decided that it was too complicated a system.

Now Retail Electric Providers (REPs) have a few ways they structure their plans, each of which has different contract terms as well as its own advantages and disadvantages.

Fixed-rate

The simplest plan is the Fixed Rate energy plan - this means that for the entire term of your contract, which is typically a minimum of three months but can go up to 24 months, your rate will not change.

This is easy for you because there’s no real guesswork involved - you know what your rate is going to be when you wake up tomorrow and next week and next month right up until your contract term ends.

Not so great if the rates drop and you end up paying more than everybody else, though, and of course, you’re almost certain not to get the same rate if you re-up your contract. But you never know: you might luck into a lower rate.

Indexed rate

Then there’s the Indexed electric plan.

This one can be on a monthly or term basis with a rate that’s calculated by a formula (which they will gladly share with you) with the base being the public index or some other publicly available information.

Variable-rate

The third option is the Variable-rate plan, the one that surprises you every month.

Did it go up? Did it go down?

Even though the company generally isn’t obligated to notify you of any rate changes.

Historically the monthly variance hasn’t been excessive with Variable rate plans, so it may be a reasonable compromise between the locked-in stability of the Fixed Rate plan and the volatility of the Indexed plan.

Find out if a fixed rate or a variable rate is best for you.

Your choice, your power to choose

In Texas, the power to choose is yours and it depends, ultimately, on you: your personality, your preferences, and your spending habits.

If you’re a conservative type of person who likes to know exactly how much to budget each month, then the Fixed Rate is probably a better one for you.

If you’re a devil-may-care, put-the-pedal-to-the-metal type, go ahead and fly with the Indexed plan.

If you like a reasonable chance of savings with maybe not quite so much risk, then definitely you might like the Variable-rate plan.

Use Compare Power to research the available offers before you make your final selection - you can never go wrong with getting all the information you need for the best decision.