Fixed vs. Variable Electricity Rates in Texas: Which Should You Choose?
Every Texas electricity plan is one of three rate types — fixed, variable, or indexed — and the type matters more than almost any other feature of the plan. It determines whether your price can change, when, and by how much. Here's what each one actually means, and how to choose.
Fixed-rate plans: the price is locked
A fixed-rate plan locks your energy price for the length of the contract — 6, 12, 24, sometimes 36 months. Summer heat waves, winter storms, wholesale market chaos: your rate doesn't move. (The only exceptions allowed are changes in regulated delivery charges or new laws, which affect every plan equally.)
The trade-offs are mild: you commit for the term, and leaving early usually costs an early-termination fee of $150–$395 — though Texas law waives it if you move and show proof. For most households, a fixed plan is the right default. It converts your single biggest utility risk — price spikes — into someone else's problem.
Variable-rate plans: the price can change every month
A variable (month-to-month) plan has no contract and no cancellation fee — and no price protection. The provider can change the rate every billing cycle, and history says those rates drift up much more readily than down. Variable plans typically start higher than comparable fixed plans, and loyal customers who never look at their bill end up quietly paying far above market.
The legitimate use for variable plans is flexibility: you're in a short-term rental, about to move, or bridging a month while you shop. As a long-term home, they're where good deals go to die.
Indexed plans: the price follows a formula
An indexed plan ties your rate to a published formula — often the wholesale electricity price. When wholesale is cheap, these plans can beat everything else on the market. The catch is that you carry the market risk yourself, and Texas taught everyone what that means: in February 2021, Winter Storm Uri pushed wholesale prices to the $9,000/MWh cap for days, and customers on wholesale-indexed plans received bills in the thousands of dollars for a single week. Regulators have since restricted the worst structures, but the principle stands — if you can't explain the formula, don't buy the plan.
The renewal trap (read this part twice)
Here's the pattern that costs Texans more than any rate-type mistake: you sign a great 12-month fixed plan, life happens, and 12 months later the contract quietly expires. What happens next? Your provider rolls you onto a month-to-month "holdover" rate — a variable rate that is routinely 30–70% above the market. They'll send a renewal notice (required by law, starting about 30–60 days before expiration), but it arrives looking like every other piece of provider mail.
The defense is one calendar entry: when you sign a plan, set a reminder for two weeks before it ends. Shopping takes ten minutes, switching is free at contract end, and the difference between a renewal-shopper and a holdover-coaster is routinely hundreds of dollars a year.
So which should you choose?
- Most households: a 12-month fixed plan hits the sweet spot — long enough to ride out seasonal price swings, short enough to re-shop annually. Compare by estimated bill at your usage, not the advertised rate.
- Rate-watchers with flexibility: 24–36 month fixed plans lock in longer when rates are low; just remember the termination fee runs longer too.
- Short-timers: month-to-month variable, held briefly and on purpose.
- Almost nobody: wholesale-indexed plans, unless you genuinely track the ERCOT market and can absorb a bad week.
Whatever you choose, the plan's rate type, term, and fees are all disclosed on its Electricity Facts Label — and every plan in our comparison tables is labeled by type so you can filter to fixed-only in one click.