For most Texas households, a 12-month contract offers the better combination of competitive pricing and flexibility, but a 24-month plan can pay off when rates are rising and the household is stable. The right answer depends on three variables: where wholesale prices are headed, how likely the household is to move, and how large the early termination fee (ETF) is if plans change.
This guide compares 12-month, 24-month, and 36-month electricity contracts on price, risk, and practical fit, so readers can make a decision based on evidence rather than a salesperson's pitch.
How Texas Electricity Contract Terms Work
In the deregulated Texas electricity market, retail electric providers (REPs) lock in a rate for a defined term. When the term ends, most providers automatically roll the account onto a month-to-month variable plan, which typically carries a higher rate. Signing a new fixed-rate contract restarts the clock.
The Public Utility Commission of Texas (PUCT) requires every provider to disclose the contract term, the ETF, and the rate structure in a standardized Electricity Facts Label (EFL). Readers should always check the EFL before signing, not just the advertised headline rate.
The Price Difference Between Term Lengths
Longer contracts generally carry a risk premium. Providers hedge their supply costs over a longer window, and that hedging is not free. Shorter contracts reflect more current wholesale conditions.
As of August 28, 2026, plans listed on ChooseMyPower showed a median all-in rate of 14.8 cents per kWh at 1,000 kWh usage across 121 live plans from 17 providers. The cheapest listed plan sat at 5.6 cents per kWh all-in at 1,000 kWh (Just Energy, Smart Choice 12, lowest-cost utility area). That plan is a 12-month contract, which illustrates a pattern that appears regularly in the Texas market: the most aggressively priced offers tend to cluster in the 12-month tier, where providers compete hardest for new customers.
That said, during periods when wholesale power prices are rising, 24-month plans can lock in a rate below what 12-month renewals will cost a year later. The challenge is that no household, and no provider, can predict wholesale prices with certainty.
Early Termination Fees: The Hidden Cost of Longer Contracts
The single biggest risk in a 24-month or 36-month contract is the ETF. Texas REPs charge ETFs in two common structures:
Flat fee. A fixed dollar amount, commonly between $100 and $300, regardless of how many months remain. A $200 ETF on a 24-month plan signed 14 months ago costs the same as one signed two months ago.
Per-remaining-month fee. A charge for each month left on the contract, often $10 to $25 per month. On a 24-month plan with 18 months remaining, that could reach $450.
A household on a 12-month plan faces a maximum ETF exposure window of 12 months. A household on a 24-month plan faces up to 24 months of exposure. Life events like divorce, job loss, or a change in household finances do not pause ETF obligations. Relocation is the important exception: under PUCT Substantive Rule §25.475(c)(2)(C), a contract covers service only at the address named in it, and no early termination fee may be assessed as a result of a customer's move as long as the customer provides a forwarding address and, if the provider asks, reasonable evidence that they no longer occupy that address.
Before signing any plan longer than 12 months, calculate the worst-case ETF scenario and decide whether the rate difference justifies it.
When a 24-Month Contract Makes Sense
A 24-month contract is worth considering when all of the following are true:
- The household has high confidence it will stay at the same address for at least 24 months.
- The 24-month rate is at least 1.0 to 1.5 cents per kWh lower than comparable 12-month options, enough to offset the ETF risk on a net-present-value basis.
- Wholesale natural gas futures and ERCOT forward prices suggest upward rate pressure over the next 12 to 18 months. (ERCOT publishes settlement point price data that informed shoppers can review.)
- The ETF structure is a flat fee rather than a per-remaining-month fee, capping downside risk.
If any of these conditions is uncertain, the 12-month plan is the lower-risk choice by default.
When a 12-Month Contract Is the Better Call
A 12-month contract is the right default for most households. It offers a fixed rate that protects against variable-rate spikes, a renewal window every 12 months to capture falling rates, and limited ETF exposure.
Renters have a particularly strong case for 12-month plans. Lease terms and electricity contracts rarely align perfectly, and while a documented move-out means no ETF under §25.475(c)(2)(C), a renter who loses a locked-in rate mid-term still has to re-shop the market at whatever prices prevail.
Shoppers who last signed a contract more than 12 months ago and rolled to a month-to-month variable rate are likely paying above-market rates right now. A 12-month fixed plan is almost certainly cheaper than whatever default variable rate the provider assigned at rollover.
Should Anyone Sign a 36-Month Contract?
Thirty-six month contracts are rare in the Texas retail market, and for good reason. The rate premium providers charge to hedge three years of supply can be substantial. The ETF exposure window is the longest of any standard option. And rate conditions in Texas can shift meaningfully within a single year, as the market demonstrated during Winter Storm Uri in February 2021 (ERCOT data).
A 36-month contract might be worth examining for a household that owns its home, has no near-term plans to move, and is offered a rate materially below current 12-month options. Outside of those narrow conditions, the flexibility cost is hard to justify.
One Pricing Trap to Watch Regardless of Term Length
Contract term length is not the only variable that affects what a household pays. Rate structure matters just as much.
As of August 28, 2026, 18 of the 121 plans listed on ChooseMyPower carried a bill-credit cliff, where a bill at 500 kWh usage runs $25 or more above the bill at 1,000 kWh. These plans are designed around a usage threshold that triggers a bill credit, and households that use less than that threshold pay a disproportionately high effective rate. A 24-month contract with a bill-credit cliff and a household that uses 600 kWh per month is a more expensive commitment than it appears on the plan comparison page.
Always check the EFL at the specific usage level that matches the household's actual consumption, not just the 1,000 kWh benchmark rate used in advertising.
How to Compare Term Lengths Side by Side
Here is a practical method for evaluating 12-month versus 24-month options on ChooseMyPower:
- Filter plans to the household's utility area and set the usage slider to the household's average monthly kWh from the last 12 electric bills.
- Sort by all-in rate at that usage level, not by advertised price.
- Note the ETF for every plan under consideration. Calculate the worst-case ETF cost.
- Divide the worst-case ETF by the monthly savings the longer contract offers. The result is the break-even month. If that number exceeds 12, the 24-month plan does not justify its risk.
- Check the EFL for bill-credit structures, minimum usage fees, and TDU pass-through language.
This process takes about 15 minutes and produces a decision grounded in actual numbers rather than advertised rates.
The Bottom Line
For a household with stable housing and a clear view that rates are rising, a 24-month contract with a flat ETF and a meaningfully lower rate is a defensible choice. For everyone else, a 12-month fixed-rate plan is the lower-risk, more flexible option that still protects against variable-rate spikes. Thirty-six month contracts carry more risk than most households need to accept. Whatever term length a household chooses, the rate structure and ETF terms on the EFL matter as much as the headline rate.