Fixed-Rate vs. Variable-Rate Electricity: Which One is Best?

Here in Texas, most of the state’s electricity market is competitive. That means residents have the power to choose their own light company. While having choices is great, it also means you have to comb through a lot of different plans to find the right one.

When you start shopping, you’ll quickly realize that plans generally fall into a few main categories. Homeowners need to know the difference between fixed-rate vs. variable-rate electricity.

Picking the best electricity plan for your home can be complicated. Should you lock in a rate for years or take a gamble on a month-to-month plan? In this guide, we’ll break down the differences and the pros and cons and ultimately answer the question: Which type of electricity plan is best?

Table of Contents

• Understanding Your Options
• Fixed-Rate Electricity Plans
• Variable-Rate (Month-to-Month) Electricity Plans
• Prepaid Electricity Plans
• The Verdict: Which One is Best?
• Let Energy Ogre Find the Best Plan For You

Understanding Your Options

To make an informed choice, you need to know exactly how retail electricity providers (REPs) price their power. Here is a breakdown of the two most common plan types in Texas.

Fixed-Rate Electricity Plans

Because electricity demand changes drastically based on seasonal temperature swings (like our blazing Texas summers and freezing winters), energy prices naturally fluctuate. A fixed-rate plan protects you from this volatility by guaranteeing the same energy charge per kilowatt-hour (kWh) for the duration of your contract, which usually lasts anywhere from a few months to a few years.

The Pros:

• Predictability: Your energy rate will not increase if the energy market spikes.
• Easier Budgeting: Your bill will only fluctuate based on how much electricity you actually use.
• Long-Term Savings: By locking in a low, cost-efficient plan for 9 to 12 months at the right time, you are generally protected from the high seasonal rates of summer and winter.

The Cons:

• Early Termination Fees: Because a fixed-rate plan requires a contract, you may be subject to an early termination fee (ETF) if you cancel before your contract expires.
• No Rate Drops: If market prices magically plummet, your fixed rate won't decrease.

Note: Fixed-rate (and Variable-rate) plans in Texas have delivery charges. This means that while your energy rate is locked, the delivery fees charged by your local utility (TDSP) and PUC-assessed taxes may still change slightly, multiple times a year.

Variable-Rate (Month-to-Month) Electricity Plans

As the name suggests, the price of a variable-rate plan changes from month to month. In Texas, these are typically month-to-month energy plans with no long-term contracts. The catch? The variable rate changes at the total discretion of the REP. They can hike up your price for any reason—demand, weather, grid problems, or simply because they want higher profit margins.

The Pros:

• No Contracts: You have the flexibility to switch electricity providers as often as you want.
• No Cancellation Fees: Because there's no contract, you won't have to worry about paying an ETF.
• Potential for Lower Rates: If the overall energy market price decreases, your rate could theoretically decrease.

The Cons:

• Extreme Price Spikes: Your bill is highly vulnerable to rate hikes, especially during summer heatwaves or winter freezes when energy demand increases and the price of energy rises.
• Unpredictable Budgeting: Because your rate can wildly fluctuate from month to month, budgeting is incredibly difficult.

Prepaid Electricity Plans

While fixed and variable plans are the most common, you may also see some plans labeled as "prepaid." These pay-as-you-go plans don't require a credit check or a contract. However, they are almost always more expensive than standard plans and come with high late fees and quick disconnection policies.

The Verdict: Which One is Best?

Fixed-rate plans are the safest, most predictable, and most cost-effective option for Texans. Variable-rate plans are a massive gamble.

Fixed rates offer stability. They allow you to live your life normally—running the dishwasher, doing laundry, and blasting the A/C—without worrying that a sudden market spike is going to result in a $500 electricity bill.

Let Energy Ogre Find the Best Plan For You

Finding the right fixed-rate plan still requires math. You have to read the Electricity Facts Label (EFL), calculate fees, and understand your home's historical usage to avoid traps.

Or, you could just let us do it for you.

At Energy Ogre, we actively monitor hundreds of electricity plans. When you sign up, we analyze your home's usage and automatically enroll you in the most cost-effective fixed-rate contract available. When that contract expires, we do it all over again so you never fall into an overpriced variable rate.

We give our members the assurance of knowing they are always in a great plan, all for just $12 a month.

Curious to see how much money a good fixed-rate plan could save you? Grab your most recent electricity bill and run it through our custom “Energy Savings Calculator for Texas Homes.”

See Your Savings

Not only does Energy Ogre help you save money, we make your life simpler as well! Once you’re a member with us, you’ll never have to wait on hold with your provider again. Our award-winning team handles everything: setting up payments, solving billing issues, negotiating renewals, and more. We can even help you if you move to a different home.

You deserve the right plan with minimal effort. Sign up today to get started.
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