Tiered electricity plans are among the options available in Texas’s deregulated market. Since the early 2000s, the Public Utility Commission of Texas (PUCT) has required Retail Electricity Providers (REPs) to display the average price per kWh at 500, 1,000, and 2,000 kWh. These usage levels help shoppers compare plans across different home sizes.
Because of the flexibility that the deregulated market offers, many providers offer plans where the energy charge itself changes at set usage thresholds. Instead of a single flat energy rate, the charge adjusts as you move from one tier to the next, which can affect your monthly bill depending on how much electricity you use.
The key is understanding how those tiers are structured before you enroll so you can match a plan to your typical usage and avoid unexpected costs.
A tiered electricity plan charges a different “energy charge” based on how much power you use in a billing cycle. Each energy charge applies to a specific usage band. For example, you might pay a higher energy charge for the first 999 kWh, and a lower energy charge at anything above 1,000 kWh.
Many Texans choose tiered plans because they can work well for households with predictable, consistent usage. If your typical kWh falls comfortably within a tier with a more favorable energy charge, a tiered plan can offer good value. But if your usage fluctuates above or below those thresholds, your total cost may swing more than expected. Understanding where your home’s usage usually lands is essential for deciding whether a tiered structure will benefit you or create surprises on your monthly bill.
On a tiered plan, your Electricity Facts Label (EFL) will outline the specific usage ranges where different energy charges apply. These levels are created by the REP and can vary from plan to plan. Every EFL also includes the average price at 500, 1,000, and 2,000 kWh. These three numbers are standard comparison points required by the PUCT. They are not the plan’s actual tiers. Some tiered or bill-credit plans might align their pricing near those ranges, but the EFL’s reference levels exist only to help you compare plans on equal footing.
REPs set your energy rate and plan structure, including tiers, base charges, minimum usage rules, and bill credits. Transmission and Distribution Utilities (TDUs) such as CenterPoint, Oncor, AEP, and TNMP manage the poles, wires, and meters that bring electricity to your home. Their delivery charges are regulated and passed through on your bill at the same rate, no matter which REP you choose.
Here’s how a tiered plan can impact your bill when the energy charge shifts at specific usage thresholds.
Crossing a tier changes your energy charges. Some plans apply a blend of tiered rates, while others (like the example) are more simple. Always check the EFL so you know exactly how your plan handles those tier transitions.
Tiered electricity plans work best for Texans who understand their household’s energy habits and can keep usage within a predictable range. Because the energy charge shifts at specific usage thresholds, these plans can offer better overall costs when your monthly consumption consistently places a meaningful portion of your usage in a lower-cost tier. This can include:
Households that regularly fall in the “sweet spot” tier (typically between 1,000–2,000 kWh, depending on the plan) can enjoy better average pricing. Consistency is key here; tiered plans favor steady usage rather than fluctuating usage.
Texans who know their historical usage from past bills or smart meter data can choose a tiered plan where their typical kWh aligns with the most cost-effective tier. When a significant share of your usage regularly falls in a tier with a lower energy charge, your total monthly cost can be less than a fixed-rate plan.
Some households make small adjustments to keep their usage from crossing into a higher-cost tier or to ensure more of their usage falls into a lower-cost tier. Actions like raising the thermostat a degree, sealing drafts, or updating inefficient appliances can help. Tiered plans tend to work best for Texans who are mindful of their energy habits and willing to make small tweaks to stay in the tier that benefits them most.
Tiered plans aren’t for everyone. Some households won’t see meaningful savings because their usage doesn’t align with the tiers where lower energy charges apply. Before enrolling, consider whether your home’s size and energy habits fit the structure of a tiered plan. These plans usually don’t work well for:
Studio or one-bedroom apartments that use less than about 600–800 kWh per month often never reach the tier where the lower energy charge kicks in. Because many tiered plans structure their most favorable energy charge around 1,000 kWh or more, low-usage households can end up with a higher overall cost. Check the 500 kWh line and the base charges on the EFL and compare it to straightforward fixed-rate plans to see which aligns better with your typical usage.
Homes with wide usage swings often move back and forth between tiers throughout the year. That means their bill is regularly affected by different energy charges, which can make budgeting difficult and reduce the value of a tiered structure. In cases where usage varies significantly from month to month, a fixed-rate plan may provide more predictable and manageable costs.
Without a sense of your typical monthly kWh—either from past bills or smart meter history—it’s hard to know whether your usage will fall into the tiers with lower or higher energy charges. Estimating your consumption before choosing a plan helps you avoid surprises and pick an option that truly fits your household’s needs.
In case a tiered plan doesn’t seem like the best fit, let’s take a look at how they compare to other electricity plan types.
| Plan Types | How Pricing Works | What It Means for You |
|---|---|---|
| Flat-rate (flat-bill) | You pay a single flat charge each month that covers all your electricity usage and at times up to a set limit (ex. 2,000 kWh). | Easier to budget if your usage stays under the cap, but bills can spike quickly if you exceed the maximum kWh amount. You may end up paying a higher rate if you don’t use a lot of electricity. |
| Fixed-rate | You lock in a set price per kWh for the length of your contract (commonly 6, 12, or 24 months). | Stable, predictable energy rates that protect you from market spikes. Best for households who want long-term price stability. |
| Tiered | Price changes when your usage crosses a specific kWh band. | Can reward you if your usage stays in the “sweet spot,” but costs can jump if you move into another tier. |
| Usage credit/bill credit | You get a fixed bill credit if you use a certain amount of electricity each billing period (e.g., 1,000 or 2,000 kWh). | It can show a very low “average” rate at a specified usage level, but bills can spike if you miss the usage threshold. |
| Time-of-use (TOU or free electricity) | You get free or reduced electricity usage during specific hours (usually evenings or weekends). | It can save you money if your household uses the most electricity during the plan’s free periods. You are still responsible for paying delivery fees during free periods. |
Reading the EFL is the best way to understand precisely how a tiered plan prices your usage. With tiered plans, the most important details are the usage ranges listed in the energy charge section and how those charges change as you move from one tier to the next.
The tiered plan EFL shows the average prices at 500, 1,000, and 2,000 kWh, but these are standard comparison points required by the PUCT.
When reviewing tiered plans side by side, focus on:
These details show when your pricing shifts from one band to another and how your effective cost changes if your usage moves up or down each month.
Choosing a tiered electricity plan in Texas can be worthwhile if you understand your usage and stay within the right range. These plans can reward consistency, but they also require attention to detail, especially when your household’s energy use changes from season to season. Reviewing the EFL carefully and comparing real usage with plan tiers is the best way to determine whether a tiered structure fits your lifestyle.
Power Wizard makes shopping for electricity easier. Enter your ZIP code into our smart comparison tool now to instantly view dozens of electricity plans, providers, terms, and rates side by side.
Tiered electricity plans can be cheaper than traditional fixed-rate plans, but only when your household’s usage consistently falls within a tier that has a lower energy charge. If most of your monthly consumption stays in that favorable tier, your overall bill may be lower than with a fixed-rate plan. If your usage is too low to reach the better tier or often lands in a higher-cost tier, a fixed-rate plan may offer more predictable, lower monthly costs. The value of a tiered plan depends on how closely your usage matches the plan’s tier structure.
What happens when you cross a tier threshold depends on how the specific plan is designed. Some tiered plans only apply the next tier’s energy charge to the kilowatt-hours you use above the threshold, while your earlier usage keeps the lower-tier energy charge. Other plans have multiple tiers with different energy charges of each tier. Read your plan’s EFL for the most accurate information.
They can, but many tiered plans are designed around usage levels more typical of larger Texas homes. If you’re in a studio or one-bedroom apartment and often use under 600–800 kWh, you might miss the best tier entirely or pay a higher effective rate once base charges are factored in. In those cases, a straightforward fixed-rate plan that prices well at 500–1,000 kWh is usually a better fit.
Start by looking at 6–12 months of past electricity bills to see your typical kWh usage and how much it changes season to season. If your usage is fairly consistent and lines up with the plan’s best-priced tier, a tiered plan might make sense. If your usage fluctuates a lot—or you’re a new mover without history—fixed-rate plans are usually safer. A comparison tool that lets you plug in your actual or estimated kWh can quickly show whether a tiered plan helps or hurts your total bill.
Free nights and weekends or “nights and weekends” electricity plans are time-of-use (TOU) plans that can charge as l...
Sometimes, the weather doesn’t make budgeting easy. When summer heat pushes your AC into overdrive or a cold front rol...
Wondering how much electricity costs in a Texas apartment? The answer depends on more than just your ZIP code. From blaz...
