Fixed vs Variable Electricity Rates — Which is Right for You?

4 minute read · Plan types

When shopping for electricity in Texas, one of the first decisions you'll make is whether to choose a fixed or variable rate plan. Each has real advantages — and real risks. Getting this choice right for your situation can make a meaningful difference in what you pay over the next year.

Fixed rate plans

A fixed rate plan locks in your energy rate for the entire contract term — typically 12, 24, or 36 months. No matter what happens to wholesale electricity prices during that time, your rate stays the same.

The main benefit is predictability. You know exactly what you'll pay per kilowatt-hour, which makes budgeting straightforward. The tradeoff is that if market prices fall significantly, you're locked into a higher rate — and switching early usually triggers an early termination fee (ETF), which in Texas commonly ranges from $150 to $300.

Variable rate plans

A variable rate planfluctuates month-to-month based on wholesale electricity market conditions. Your provider sets the rate each month, and there's typically no long-term contract and no early termination fee.

Variable rates can be lower than fixed rates during mild weather when electricity demand and wholesale prices are low. But they can also spike dramatically. In February 2021, Winter Storm Uri sent wholesale electricity prices in Texas to the market cap of $9,000 per MWh — $9 per kWh — for nearly a week. Customers on variable plans saw monthly bills in the thousands of dollars.

Other plan types

Texas also has several hybrid plan types worth knowing:

• Indexed plans — Rate is tied to a published market index (such as ERCOT Day-Ahead prices). More transparent than standard variable plans, but still carries market risk.
• Prepaid plans — No credit check, no deposit, no contract. You pay for electricity in advance and receive daily balance alerts. Rates are often slightly higher than comparable fixed plans.
• Free Nights or Free Weekends — A fixed-rate plan where electricity during specific hours (typically 9 PM–6 AM, or all weekend) is free. The base rate during peak hours is higher to compensate, so these plans favor households that can shift usage to off-peak times.

How to choose

For most Texas households, a 12-month fixed rate plan offers the best balance of price and predictability. Fixed rates in Texas are currently competitive, and locking in protects you from summer heat spikes and winter freeze events.

If you're moving in less than six months or genuinely comfortable with market risk, a no-contract variable plan gives you flexibility. Just check the rate monthly and be ready to switch quickly. Texas Energy Compare's plan type filter lets you view only fixed, variable, or indexed plans in your area — enter your ZIP code to get started.