Electricity Contract Terms You Should Know

Why Contract Terms Matter

When you sign up for an electricity plan in Texas, you are entering into a contract with a Retail Electric Provider. The terms of that contract determine what you pay, how long you are committed, and what happens if you want to leave. Understanding these terms before you sign up saves you from surprises later.

The Electricity Facts Label (EFL)

The EFL is the most important document in Texas electricity shopping. The Public Utility Commission of Texas requires every REP to publish an EFL for every plan they offer. It is a one-page standardized document that includes:

• Average price per kWh at 500, 1,000, and 2,000 kWh
• Contract length (for example, 12 months)
• Early termination fee amount
• Whether the rate is fixed or variable
• Renewable energy content as a percentage
• A breakdown of energy charges, TDU delivery charges, and other fees

The EFL is the great equalizer. Because every REP uses the same format, you can compare plans side by side without wading through marketing language.

Your Rights as a Customer (YRAC)

The YRAC document outlines your rights under Texas law. Every REP must provide it, and it covers things like:

• Your right to switch providers at any time
• Your right to receive a notice before disconnection
• Your right to a payment plan if you are struggling to pay
• Your right to file a complaint with the PUCT
• Protections against disconnection during extreme weather

Keep your YRAC on file. If you ever have a dispute with your REP, this document tells you exactly what they are required to do by law.

Early Termination Fees (ETFs)

Most fixed-rate plans include an early termination fee if you cancel before the contract ends. Here is what you need to know:

• Typical range: $50 to $200, with most plans charging $150
• Per-month fees: Some plans charge a fee per remaining month (for example, $20 per month remaining). These can be very expensive if you cancel early in a long contract
• No-ETF plans exist. Some REPs offer fixed-rate plans with no early termination fee. They may have slightly higher rates, but they give you complete flexibility
• Waiver for moves: Many REPs waive the ETF if you move to an area outside their TDU territory. Check the Terms of Service for details

Auto-Renewal

This is one of the most common traps in Texas electricity. When your fixed-rate contract ends, most plans automatically roll you into a month-to-month variable rate. That new rate is almost always significantly higher than what you were paying.

Texas law requires your REP to send you a renewal notice at least 30 days before your contract expires. That notice must include:

• Your current rate
• The rate you will be moved to if you do nothing
• Your right to choose a new plan or switch providers

Set a calendar reminder 6 weeks before your contract end date. That gives you time to shop, compare, and switch before the auto-renewal kicks in.

Contract Length

Texas electricity contracts typically range from month-to-month to 36 months. Here is a general guide:

• Month-to-month: Maximum flexibility, but no rate protection. Good for short-term situations
• 6 months: Short commitment with some rate stability
• 12 months: The most popular choice. Covers a full cycle of seasons
• 24-36 months: Longest price protection, but you are locked in. Best when rates are historically low

Other Terms to Watch

Base charges. A flat monthly fee, usually $4.95 to $14.95, that adds to your per-kWh cost. The impact depends on how much electricity your home needs each month.

Bill credits. A discount applied when your monthly kWh falls within a specific range. Great if you consistently hit the range, costly if you do not.

Minimum consumption fees. Some plans charge a penalty if your monthly kWh drops below a threshold, often 1,000 kWh.

Renewable energy content. The EFL shows what percentage of the plan’s electricity comes from renewable sources. Plans range from 0% to 100%.

Time-of-use pricing. Some plans charge different rates based on the time of day. “Free nights” plans, for example, give you free electricity from 9 PM to 6 AM but charge a higher rate during the day.

The Bottom Line

Reading your EFL, understanding the auto-renewal clause, and knowing your early termination fee are the three most impactful things you can do before choosing a plan. Take five minutes to read these documents before you sign up — it can save you hundreds of dollars over the life of your contract.