Thanks to a deregulated electricity market, most residents have the power to choose their Texas retail electricity provider (REP). They can also choose from many plan term lengths. Energy rates in Texas vary by plans. Often, the term length can affect those rates.
What term lengths do Texas electricity providers offer?
To meet varying consumer needs, Texas electricity providers offer plans with numerous term length options. The most common term lengths include:
- Month-to-month: No long-term contract means you can switch plans or providers anytime. However, your rate can change each month. For this reason, month-to-month plans are also referred to as variable-rate plans.
- 6-month: A contract for half a year, with energy rates locked in for that amount of time.
- 12-month: One of the most common electricity plan term lengths. You get an entire year of price security.
- 18-month: A term length with price security for a year and a half.
- 24-month: Two years of locked-in energy rates.
- 36-month: Three years of fixed electricity rates.
Any plans with more than a month-to-month term length are also referred to as fixed-rate plans. That is to say, enrolling on a fixed-rate plan lets you lock in the same energy rate for the whole contract.
How do energy rates in Texas relate to a plan’s term length?
Often, but not always, there is an inverse relationship between the number of months of a contract and the price per kWh. That is, the longer the contract term length, the lower the Texas electricity rates may be.
Why? The longer you’re locked in at a fixed price, the less guessing a retail electricity provider has to do when purchasing power. (And, if an electricity provider guesses too low and cannot supply enough power, they must purchase more power at higher prices to meet customer demand.)
Therefore, the lower rates give consumers an incentive to choose longer term lengths. As a result, the electricity provider lowers its risk of over- or under-buying energy.
Texas electricity rates for long-term plans
When you shop for electricity, you’ll probably see a lot of fixed-rate plans available. Many people prefer to enroll in a long-term electricity plan, for a number of reasons.
What are the benefits and drawbacks a long-term electricity plan?
An electricity contract with a term length of 6 or more months has a number of benefits:
- You get a steady, fixed rate for a specific period of time.
- It’s easier to construct a budget.
- You won’t have to shop for energy or switch providers as often.
But, a few things to consider about fixed-rate plans include:
- Many contracts have early cancellation fees
- You’re locked into a long-term commitment
- You may not be able to take advantage of market rate drops if they occur
If you think the pros of a long-term contract outweigh the cons, this might be the type of term length for you. If not, you may want to explore a variable-rate plan.
Energy rates in Texas for short-term plans
As you shop and compare electricity plans for the best electricity rates in Texas, you may come across a number of appealing short-term plans. Some people prefer these variable-rate options.
What are the benefits and drawbacks of a short-term electricity plan?
Going month-to-month with your home electricity offers some benefits to the consumer, such as:
- The flexibility to change plans anytime, without early termination fees
- More chances to take advantage of lower energy rates in Texas
- No long-term commitment to any provider
As with fixed-rate plans, variable-rate plans have a few drawbacks, like:
- Your rate can spike without warning
- It’s more difficult to budget (you’re at the mercy of the energy market)
- You may spend more time shopping for energy plans and switching providers
If you think the pros of a short-term contract outweigh the cons, you may want to choose this type of plan. However, if it feels too risky for you, a fixed-rate plan may be your better option.
What affects the variable energy rates in Texas?
The energy rates in Texas for variable-rate plans depend on the market price of energy. As a result, month-to-month electricity plans can experience more volatility than fixed-rate plans. Forces affecting the variable rate include weather, government regulations, geopolitical events, outages and other outside factors, like pandemics and natural catastrophes.
How do I find past rates for a month-to-month plan?
If you’re considering signing up for a month-to-month electricity plan, you probably want to know about the recent monthly rates. You can usually find this information on the REP’s website or by searching the web for the REP and its “past variable rates” or “historical pricing.”
Transmission/Distribution Service Providers (TDSPs) like ERCOT also lists past variable rates for month-to-month Texas electricity plans.
What’s better: a short-term or a long-term energy plan?
As you can see, each type of electricity plan has its own set of pros and cons. Therefore, these should be weighed against your unique situation, budget and lifestyle. Then, with careful consideration, you can narrow down which type of plan suits you best.
Shop Texas electricity rates for all term lengths
In conclusion, you now know how energy rates in Texas and a plan’s contract length can be related. As a result, you can now better understand the options available to you. And, you probably have a term length in mind that would best suit your unique situation.
So, all that’s left to do is simplify your search by using Everything Energy’s tools to shop and compare plans. We make it easy to find your perfect energy match from Texas electricity providers you can trust!
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