Fixed vs variable electricity rates in Texas: when each actually makes sense

In Texas's deregulated electricity market, you can lock in a price for a set number of months, or you can let the price reset every month. About 90% of households should lock. The 10% who should not have specific reasons, and this post lays out which group you are in.

Fixed-rate plans dominate the Texas market for a reason. The Public Utility Commission of Texas reports that the vast majority of residential customers on Power to Choose select fixed terms ranging from 12 to 36 months. The reason is simple: a fixed contract converts an unknown future bill into a known one. That predictability has real value when you are budgeting a household.

Variable-rate plans flip the tradeoff. The rate can change month to month, the provider sets the new rate at their discretion within EFL-disclosed bounds, and you can leave any time without an early termination fee. No contract, no ETF, no guarantee.

What "fixed" actually locks in

A fixed-rate plan locks the energy charge per kWh for the length of the contract, typically 3, 6, 12, 18, 24, or 36 months. What it does not lock is the TDU delivery charge. Your transmission and distribution utility, Oncor or CenterPoint or AEP or TNMP, bills a separate per-kWh delivery fee that the PUCT approves on its own schedule. That charge can change during your contract, and it passes through to your bill. The energy portion is fixed. The wires portion is not.

A 12-month fixed at 11.5¢ per kWh in March 2026 will still be 11.5¢ in February 2027, regardless of what happens to ERCOT wholesale prices in between. If wholesale drops, the provider keeps the margin. If wholesale climbs, the provider absorbs the cost. That risk transfer is what you are paying for.

The standard early termination fee is $150 to $300, charged if you cancel before the contract ends. Two exceptions: ERCOT rules require providers to waive the ETF when you move outside the provider's service territory, and most plans waive it during a 3-day cancellation window after enrollment.

What "variable" actually means after 2021

Before February 2021, Texas had a third category called wholesale-indexed plans, marketed by companies like Griddy. These passed ERCOT's real-time wholesale price through to the customer with a small markup. When Winter Storm Uri sent ERCOT prices to the $9,000/MWh cap for days, customers on these plans received bills in the thousands or tens of thousands of dollars. The PUCT subsequently prohibited residential wholesale-indexed plans.

Today's variable-rate plans are different. They are not pure wholesale pass-through. The provider sets the rate each month within bounds disclosed in the Electricity Facts Label, typically tied to the provider's cost of supply plus a margin. The rate can still rise meaningfully if wholesale conditions shift, but the kind of catastrophic spike that hit Griddy customers in 2021 is now regulated out of the residential market.

That said, variable rates can and do move. A variable plan that started at 12¢ per kWh in summer can land at 16¢ by winter if natural gas prices rise. There is no contractual ceiling beyond what the EFL discloses, and EFL ceilings are often well above what a fixed plan would have charged.

When fixed wins

The math favors fixed for most households. If you are in your current address for at least 12 months and your monthly usage is reasonably stable, a fixed plan converts a budgeting variable into a budgeting constant. The provider takes on the price risk in exchange for the contract commitment.

For a 1,000 kWh per month household, a 1.5¢ per kWh swing between a fixed and a peak-variable rate is $15 per month, or $180 per year. That is the cost of being wrong about timing the market, and most households are wrong about timing the market.

Fixed also wins for anyone with credit thin enough that providers offer them shorter or higher-rate contracts. The deposit math is friendlier on a fixed plan because the provider's risk is bounded by the contract.

When variable wins, or at least ties

Three situations make variable plausibly defensible.

First: short-term occupancy. If you are renting and expect to move in three to six months, the ETF on most fixed plans is larger than the rate difference you would pay on a variable for that window. Run the math: a $200 ETF spread over four months is $50 per month of effective cost, larger than most realistic fixed-variable rate gaps. Month-to-month variable removes the ETF risk entirely.

Second: bridge periods between contracts. If your fixed contract ended last month and you are still shopping, the default rollover to your incumbent provider's variable rate can be acceptable for 30 to 60 days while you do real comparison work. Just do not let it run.

Third: belief that wholesale prices are about to drop. This is the bet most people lose. ERCOT wholesale is driven by weather, fuel prices, and grid conditions, and forecasting any of those reliably enough to outperform a 12-month fixed is not a residential skill. If you are wrong, the downside is large.

What to check on the EFL

The Electricity Facts Label discloses the structure. For a fixed plan, confirm: the energy rate, the contract length, the ETF amount, and the average price at 500, 1,000, and 2,000 kWh. The third of those reveals tiered structures, free-nights gimmicks, and base fees that the headline rate hides.

For a variable plan, the same disclosures apply, but the headline rate is only the current month's rate. The EFL should also disclose the past 12 months of monthly rates if the plan has that history. If a variable plan does not show recent rate history, treat that as a yellow flag.

The PUCT requires all of this disclosure. The data is there. Most shoppers do not read it.

When not to switch

If you are inside a fixed contract that is still under-market for current conditions, do not pay an ETF to switch. The math on early termination almost never works in the consumer's favor unless wholesale conditions have moved more than 3¢ per kWh against your current rate. If your rate is at or below current 12-month fixed offers, stay where you are.

If you have an active complaint or dispute with your current provider, resolve it before switching. Switching does not erase a billing dispute, and the new provider cannot help.

The decision framework

Match contract length to expected occupancy. Twelve-month minimum if you are settled, 36-month if you want maximum price certainty, month-to-month variable if your housing situation will change inside six months.

Read the EFL average price at your usage level, not the headline rate. A 9.8¢ plan can cost more than a 10.5¢ plan once base fees and tier penalties are factored in.

Compare total monthly cost across at least five providers at your TDU and usage band. The spread is usually meaningful.

Most households will land on a 12 or 24-month fixed. That is the right answer most of the time, and the reasons to deviate from it are specific and narrow. Know which group you are in before you sign.