When your Texas electricity contract ends and you do nothing, your provider does not cut your power. Instead, it moves you onto a holdover rate, and that rate is almost always significantly higher than what you were paying.
This post explains exactly what a holdover rate is, why it exists, how much it typically costs, and the steps to take before your contract expires so you are not caught paying more than necessary.
What Is an Electricity Holdover Rate in Texas?
A holdover rate, sometimes called a default renewal rate or a month-to-month variable rate, is the price per kilowatt-hour (kWh) a retail electricity provider (REP) charges a customer whose fixed-rate contract has expired without a new agreement in place.
Texas operates a deregulated electricity market, meaning residential customers in most parts of the state choose their own REP and contract terms. The Public Utility Commission of Texas (PUCT) requires providers to disclose holdover terms in the Electricity Facts Label (EFL) for every plan. That disclosure is there, but it is often buried on page two in small print.
The holdover rate is not fixed. It is variable, meaning the provider can change it from month to month. There is no cap on how high it can go. The provider is only required to notify customers 30 days before a material change to their contract terms, which in practice means a letter or email that many customers miss.
Why Did Your Electricity Rate Jump After Your Contract Ended?
This is the most common complaint ChooseMyPower hears from Texas electricity shoppers. A customer locked in at 11.5 cents per kWh for 12 months, forgot to renew, and then opened an August bill showing a rate of 16 or even 19 cents per kWh. The math is brutal at Texas summer consumption levels.
Here is why it happens:
Providers have little incentive to keep holdover rates competitive. A customer already on service requires no marketing spend, no enrollment cost, and no commission. The holdover rate exists to serve the provider's margin, not the customer's budget.
Wholesale prices fluctuate, and providers pass that volatility to holdover customers. ERCOT, the grid operator for most of Texas, settles electricity prices in real time. Variable-rate customers absorb those swings directly. During summer peaks or winter storms, wholesale prices can spike dramatically. Fixed-rate contract holders are insulated from that. Holdover customers are not.
Customers on holdover rates are often unaware of their situation. Providers send renewal notices, but open rates on billing emails are low. If a customer moved, changed email addresses, or simply did not read the notice, the switch to a higher rate happens silently.
According to U.S. Energy Information Administration (EIA) data, the average retail residential electricity price in Texas in 2023 was approximately 12.5 cents per kWh. Holdover rates from major Texas REPs during the same period were commonly documented in the 15 to 20 cents per kWh range, though rates vary by provider and month.
How to Find Out If You Are on a Holdover Rate Right Now
There are three ways to check.
Check your most recent bill. Look for a line labeled "energy charge" or "price per kWh." Then compare that number to the rate on the original plan you enrolled in. If it is higher and your term has passed, you are likely on a holdover rate.
Review your Electricity Facts Label. Every Texas REP is required to provide an EFL for every plan, including the holdover plan. Log in to your account portal and look for the current EFL. The holdover rate should be listed there. If you cannot find it, call your provider and ask for the EFL for your current rate plan.
Check your contract end date. Your original contract paperwork or account portal should show the term end date. If that date has passed and you did not sign a new agreement, you are on a month-to-month variable rate.
What the Default Renewal Terms Actually Look Like
Many Texas providers include language in their terms of service that allows automatic renewal into a new fixed-rate plan rather than a month-to-month rate. This sounds customer-friendly, but the automatically renewed plan is frequently priced above what a new customer would pay for the same term on PowerToChoose.org, the PUCT-maintained comparison shopping site.
Other providers default to a month-to-month variable plan with no fixed term and no cancellation fee. That arrangement offers flexibility but exposes the customer to rate volatility every billing cycle.
A smaller number of providers offer a "best-rate holdover" clause that promises to keep the customer at or near their previous contract rate for a limited period, typically 30 to 60 days, while they shop. These clauses are uncommon and must be confirmed in writing before relying on them.
The only reliable way to know what your specific provider will do is to read the Terms of Service and EFL for your current plan before the contract expires.
When It Makes Sense to Stay on a Month-to-Month Rate
Holdover rates are not always the wrong choice. There are specific situations where accepting a short-term variable rate is a reasonable decision.
You are planning to move within 60 to 90 days. Fixed-rate plans carry early termination fees (ETFs), typically between $75 and $200 depending on the provider and remaining months. If the ETF would cost more than the premium paid on a holdover rate during a short stay, it may not be worth locking in.
Wholesale prices are trending downward. If ERCOT forward prices suggest lower costs in the coming months, waiting before signing a fixed-rate plan could result in a better contract rate. This requires monitoring market conditions, which most households are not positioned to do easily.
You are dissatisfied with your current provider and want time to shop. A month on a holdover rate while researching alternatives is a reasonable transition. One month at a higher rate is a small cost if it results in a better 12-month contract.
Outside of these situations, signing a new fixed-rate plan is almost always the lower-cost option for a Texas household with predictable consumption.
How to Avoid a Holdover Rate in the Future
The process is straightforward if it is started at least 30 days before the contract expiration date.
Step 1: Find your contract end date. It is in your original enrollment confirmation email or your account portal. Write it down somewhere you will see it.
Step 2: Set a reminder 45 days before that date. This gives enough time to compare plans and complete enrollment before the expiration.
Step 3: Visit PowerToChoose.org. Enter your zip code and usage level. The PUCT site lists all available plans with price per kWh at 500, 1,000, and 2,000 kWh monthly usage levels. Compare those against what your provider is offering for renewal.
Step 4: Compare total costs, not just the headline rate. Some plans include bill credits that only apply at specific usage tiers. The EFL will show the effective rate at different usage levels. Match the plan's pricing tier to your actual average monthly usage, which appears on your current bill.
Step 5: Enroll before the expiration date. Most REPs can process a same-provider renewal or a switch to a new provider within one to two billing cycles. Enrolling early prevents any gap on a holdover rate.
The Bottom Line
An electricity holdover rate in Texas is not a penalty or a fee. It is simply what happens by default when a contract ends without renewal, and providers have structured it to generate higher margins from customers who are not actively shopping. The PUCT requires disclosure of these terms, but disclosure does not protect a customer who has not read the documents.
The practical answer is simple: mark the contract end date, compare plans on PowerToChoose.org at least 30 days before that date, and enroll in a new fixed-rate plan if the numbers support it. For most Texas households, that one step, done once a year, is worth more than any other action available in the deregulated market.