What Is a Usage Credit Electricity Plan in Texas (and Is It Worth It)?

Usage credit electricity plans are some of the most eye-catching offers in Texas, often showing a surprisingly low average price at exactly 1,000 kWh or 2,000 kWh. The catch is that these plans only deliver that exact price when your home lands on an exact usage target each month. Hit that number, and you earn a bill credit that reduces your total cost. If you don’t hit the specified minimum usage, the credit disappears, which can make your bill jump.

Because the advertised “best” rate is calculated with that credit included, it rarely reflects what most households actually pay. That is why understanding how usage credit plans work, how to read the Electricity Facts Label (EFL), and how your home typically uses electricity is essential before you sign up. In this guide, we break down how usage credit plans work, who they’re best for, and how to compare them so you avoid costly surprises on your bill.

In Texas’s deregulated electricity market, Retail Electric Providers (REPs) set your plan’s pricing structure, while Transmission and Distribution Utilities (TDUs) like Oncor, CenterPoint, AEP, or TNMP handle the physical delivery of power. REPs often create electricity plans that reward customers who consistently use a certain amount of electricity with a usage or bill credit.

The Basic Structure of a Usage Credit Plan

A usage credit plan starts with a standard energy rate (in ¢/kWh) plus your TDU delivery charges. The defining feature is the bill credit that applies only when your monthly usage reaches a specific kWh threshold, such as 1,000 kWh. This single credit amount (the bill credit) creates a wide tiered pricing structure for your EFL, where your cost at the target level is much lower than at other usage levels.

Here’s a simple example similar to what you’ll see on many Texas EFLs:

• Energy rate: 12.0¢ per kWh
• Bill credit: $100 applied when you reach 1,000 kWh
• TDU delivery charges: Standard fees based on your utility

 “Sweet Spot” Usage Target and Why They Matter

The “sweet spot” is the target of monthly usage where your bill credit applies and your effective rate is lowest. If your usage falls outside that target, even by just a small amount, you could lose the credit. Seasonal changes play a big role in this, as higher summer air conditioning use or lower winter electricity needs can push you above or below the credit band from month to month. Use your historical average usage to gauge how cost-effective a bill credit plan would be for your household.

Example – A Typical Texas Usage Credit Plan

This energy plan shows exactly how a usage credit creates a price difference depending on whether you hit the target.

• Energy charge: 14.4¢ per kWh
• Bill credit: $75, applied only when usage is greater than 999 kWh
• Base charge: $0
• TDU Distribution Charge: 5.9027¢/kWh
• TDU Customer Charge: $4.90 per month

Using the EFL averages:

• At 1,000 kWh, you receive the full $75 usage credit, which brings the average price down to 13.3¢ per kWh. This is the “sweet spot” where the plan looks the cheapest.
• At 500 kWh, you do not receive the credit, and the average price jumps to 21.3¢ per kWh. Even though you use less electricity, the loss of the credit causes your effective rate to rise.
• At 2,000 kWh, you still receive the $75 credit, but it is spread across much higher usage. Your average price increases to 16.8¢ per kWh, higher than the 1,000 kWh price but still lower than the 500 kWh cost.

When comparing electricity plans in Texas, the choice often comes down to simplicity versus potential savings. Traditional fixed-rate plans keep pricing straightforward, while usage credit plans add a layer of complexity that can reward specific households with lower costs.

Simplicity vs Potential Savings

A fixed-rate plan charges the same price per kWh every month, plus standard TDU delivery fees, making it easier to estimate your bill. A usage credit plan adds a conditional reward, offering a lower effective rate when your monthly usage falls within a defined usage target. This setup can reduce costs for consistent users, but it can also make bills harder to predict if your energy use fluctuates.

Usage-based electricity plans can be a smart choice for some Texas households, but only if your energy habits align with the plan’s structure. These plans reward consistency and penalize fluctuation, so it’s essential to know how much power you typically use before signing up.

Households with Predictable, Medium-to-High Usage

Families or households that consistently fall within the 1,000–2,000 kWh range (depending on the plan) are most likely to benefit. This often includes larger apartments and mid to large-sized homes. The key factor is consistency: if your usage stays relatively stable month to month, you’ll have a better chance of hitting the plan’s sweet spot and earning the usage credit regularly.

Budget-Conscious Texans Looking for Lower “Average” Rates

Usage credit plans can appear very appealing on retail energy providers and comparison sites, especially at the usage benchmarks shown on the EFL. For shoppers on a budget who understand their energy patterns, these plans can help lower the average rate paid per kWh. The savings potential is real, but only if you keep your monthly consumption within the qualifying range.

When a Usage Credit Plan Is Probably Not a Good Fit

Usage credit plans can backfire for households with unpredictable or extreme usage patterns. They’re usually not ideal for:

• Small apartments and homes that use under 1,000 kWh per month
• Homes with significant seasonal swings, such as part-time residents or frequent travelers
• Anyone who isn’t sure how much electricity they typically use

If your usage varies widely from month to month, you may find a fixed-rate or flat-rate plan provides more predictable bills.

Usage credit electricity plans can deliver solid savings in the right circumstances, but they also come with more variables than a standard fixed-rate plan. Here’s a clear look at their pros and cons so you can decide if this plan type fits your household.

Advantages of Usage Credit Plans

• Potentially low effective rate in the sweet spot: The bill credit can significantly reduce your total cost if you consistently hit the qualifying usage target.
• Good for predictable families or larger homes: Especially in metro areas like Houston, Dallas, or Fort Worth, where steady AC use keeps energy levels consistent.
• Can look competitive vs standard fixed-rate plans: For many shoppers, the advertised average price at 1,000 or 2,000 kWh can rank among the lowest options on the market.

Disadvantages and Hidden Risks

• Savings vanish if your usage drops: One off-month can push you out of the target usage and make your effective rate much higher than a simple fixed plan.
• Average price at “your” usage may be much higher: EFL averages shown at 500 or 1,000 kWh may tell a very different story once you calculate your real usage.
• It can be confusing to compare apples to apples: Without a calculator or comparison tool, it’s hard to see the true cost side by side with a basic fixed-rate plan.
• May encourage wasteful usage to chase the credit: Some customers use more electricity than they need just to qualify for the credit band.

Are Usage Credit Plans Worth It Overall?

In the end, an electricity usage credit plan can be worth it if you’re a predictable, medium-to-high usage household and you understand your typical kWh consumption. For everyone else, a straightforward fixed-rate plan is usually a safer and more predictable choice.

Before signing up for an electricity usage credit plan, take a few minutes to review the EFL. This document shows exactly when the credit applies, how it affects your average price, and what your real costs could look like if your usage changes.

Key EFL Sections to Focus On

Make sure you pay attention to:

• Average price per kWh at 500, 1,000, and 2,000 kWh: These three benchmarks show how your rate changes depending on monthly usage. Don’t just look at the lowest number on the page. A plan that’s cheap at 2,000 kWh might be far more expensive at 1,000 kWh if you miss the usage credit.
• Bill Credit or Usage Credit section: This is where you’ll find how much the bill credit is and the exact usage target it applies to.
• Base charges, minimum usage fees, and TDU delivery charges: These fixed costs apply no matter how much power you use. In some plans, a high base charge or minimum usage fee can cancel out much of the benefit from your credit.

Spotting Red Flags on Usage Credit Plans

• Even when a plan advertises a low average price, a few warning signs can indicate higher real-world costs:
• Minimum usage fees that stack with losing the credit, raising your effective rate
• High base charges that reduce the value of the bill credit

Use Your Own Usage – Not Just the 1,000 or 2,000 kWh Example

The EFL’s numbers are based on fixed usage levels, not your actual household pattern. To see what you’ll really pay, look back at your last 6–12 months of electric bills and note your average kWh usage. If you don’t have bills on hand, try a kWh calculator or visit the Smart Meter Texas website. Comparing plans using your real data helps you spot which ones truly match your energy profile, and which may cost more than they appear.

Need help comparing your options? Enter your ZIP code into Power Wizard’s comparison tool now to view dozens of electricity plans and providers in your area side by side.