Texas Power Plans: Fixed-Rate, Variable-rate, or Indexed
Before Texas deregulated electricity in 2002, your power plan was whatever the electric company decided. Now, you have t…
Feeling overwhelmed by the Texas power market? You’re not alone.
With dozens of Texas power companies competing for your business, understanding Texas electricity deregulation can seem daunting. Here’s the good news: it doesn’t have to be. This guide demystifies how deregulated power actually works — and how to stop it from working against you.
What “deregulated” actually means
Back in 2002, Texas split the electricity business into three jobs. Generators make the power. Your local utility — Oncor, CenterPoint, AEP, or TNMP, depending on where you live — delivers it over the poles and wires and fixes things when a storm knocks them down. And retail electricity providers (REPs) sell it to you.
You only choose the third one. The power in your outlets is identical no matter whose logo is on the bill, and your utility responds to outages the same way whether you pay a giant brand or a company you’ve never heard of.
That one fact should be liberating: you are shopping for a price and a contract, nothing else. No provider has “better electricity.”
Why the advertised rate isn’t your rate
Here’s where the system starts working against you. Texas electricity ads are tuned to exactly 1,000 kWh — the usage point where the plan looks cheapest on paper. Almost nobody uses exactly 1,000 kWh. Use 900 or 1,300 instead, and that “9.9¢” headline rate can quietly become 14¢ or more once base charges, delivery fees, and vanishing bill credits do their work.
That’s not an accident. It’s how the Electricity Facts Label game is played, and it’s why two neighbors on the “same” plan can pay wildly different effective rates.
The fix is simple to say and hard to do by hand: price every plan at your real usage, all fees included. That’s exactly what our TRUE Method™ — Total Real-Usage Evaluation — does. Instead of trusting three teaser price points, we compute what each plan would have cost you across your actual monthly usage, then rank plans by real cost.
The traps to watch for
Bill-credit cliffs. “Get a $100 credit when you use 1,000 kWh or more!” Use 999 kWh and the credit vanishes — your bill jumps the moment you conserve. These plans can genuinely win for steady high-usage homes, and quietly punish everyone else.
Free nights and weekends. The free hours are real; the daytime rate pays for them. Unless you can shift most of your usage into the free window — and most households can’t — you’ll usually pay more overall.
Variable and indexed rates. Month-to-month flexibility sounds nice until a hot August reprices your electricity at the worst possible moment. If you lived through the aftermath of Winter Storm Uri, you know how ugly unhedged pricing can get.
Auto-renewal drift. The most expensive plan in Texas is the one you didn’t choose — the “holdover” rate your provider slides you onto when your contract quietly expires. Set a reminder, or let our Contract Countdown do it for you.
How to actually shop
- Get your real usage. Twelve months of kWh from your utility’s smart-meter data or your old bills. Even one bill helps.
- Compare at your numbers, not theirs. Enter your usage and let every plan be priced against it — fees, credits, and delivery charges included.
- Read the contract length and the exit fee — not the marketing name. “SimpleSaver Ultra 24” tells you nothing; the EFL tells you everything.
- Check the renewal date and put it somewhere you’ll see it.
When you should NOT switch
Sometimes the honest answer is: stay put. If you’re mid-contract with a steep early-termination fee and the savings don’t beat the fee, wait. If you’re already on a well-priced fixed plan you chose deliberately in the last year, you’re probably fine — about half the people who check discover they’re already in good shape. A comparison that tells you “don’t switch” is still a win; it means you stop wondering.
The bottom line
Deregulation gave Texans real power — the power to refuse bad deals. The system’s complexity is a feature for providers and a tax on your attention. You don’t have to out-study them; you just have to compare plans at your real usage, once, and set a reminder for renewal.
Five minutes, your actual numbers, the truth. Then get back to your day, confident you aren’t overpaying.
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Written by
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Edited by
Senior Director of Product
Senior Director of Product at Compare Power. 8+ years guiding Texans to smarter energy choices through data-driven tools and editorial excellence.
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