How to Choose an Electricity Plan: Types of Plans, Considerations & More

In 2002, Texas deregulated its energy market. Utility companies still manage grid infrastructure (poles, lines, meters, etc.), but retail electric providers (REPs) now compete to sell electricity directly to customers. This change opened the door to one of the largest competitive energy markets in the country.

Deregulation gave most Texans the power to choose. Instead of being limited to a single provider, they can compare plans across dozens of companies to find the one that best matches their needs and preferences. This competition has created more options and better pricing across the state.

REPs offer different types of electricity plans to help you find one that meets your needs. Having all of these options can get confusing, so Power Wizard’s energy experts have explained each plan type below. Check out our chart for a quick comparison, or keep reading for more in-depth information.

• Fixed-rate Plans: Your rate per kilowatt-hour (kWh) stays the same for the entire contract term, whether you opt for 6 months, 60 months, or something in between. They are the simplest type of electricity plan.
• Variable-rate Plans: Also known as variable-price, the rate per kWh changes month to month based on market conditions and other factors specified by your REP. These plans are flexible but unpredictable, so make sure they fit your lifestyle before committing. At Power Wizard, we usually don’t recommend these plans to our customers, but they may help in certain situations (like mentioned above).
• Time-of-Use (TOU) Plans: These are also known as free electricity plans. They offer no cost or reduced energy usage during specific hours, like nights or weekends (some newer plans offer free weekday usage). Another example of this type of plan are EV electricity plans. TOU plans can be a great way to save money if your usage habits fit their free usage timeframes. These can be excellent for homes with solar panels that don’t produce excess electricity. Keep in mind that you still pay electricity delivery charges during the free usage timeframes.
• Prepaid/No-Deposit Plans: These are pay-as-you-go electricity plans. Instead of getting a monthly bill, you load your account with money and use electricity until your balance runs out. They can be a great option for anyone with poor or limited credit histories because they don’t require credit checks or deposits. However, they tend to have higher rates than fixed-rate plans.
• Green Energy Plans: These plans are backed by Renewable Energy Certificates (RECs), which verify that the electricity you use is matched with power generated from renewable sources like wind, solar, hydro, and more. They don’t power your home with green energy, but they allow you to support green energy investments without installing solar panels.
• Solar Buyback Plans: If you have rooftop solar panels, this plan lets you earn credits for excess energy you send back to the grid. It can maximize your investment in solar and reduce overall costs. However, bill credit terms vary by plan, so read the EFL before enrolling.
• Bill Credit Plans: Earn credits toward your monthly bill when you use a certain amount of electricity (usually 1,000 or 2,000 kWh). They can lower your bill if you consistently hit the usage threshold, but the credit disappears if you use less. Perfect for homes with a big family.
• Tiered Plans: Rates shift based on how much electricity you use. For instance, a plan might be 14.50¢/kWh at 500 kWh, 13.00¢ at 1,000 kWh, and 15.00¢ at 2,000 kWh. While all plans vary by usage, some providers take it to the extreme with big jumps—like 18¢, 12¢, and 15¢—so bills can rise fast if you hit higher tiers. It can be cost-effective for steady, moderate users.
• Incentive/Perk-based Plans: These plans offer extras like smart thermostats, loyalty rewards, or gift cards alongside your electricity service. They can add value if the perks align with your needs. However, sometimes the base electricity rate is higher, which can offset the benefit of the perks.

The “best” electricity plan isn’t the same for everyone. It depends on your home, lifestyle, usage habits, and budget. Finding the best electric plan requires looking beyond the advertised rate and considering things like:

• Budget: Choose a plan with pricing that works for your budget. Electricity plans have per-kWh rates, meaning your monthly bill will depend heavily on your usage. Not all rate structures are as simple as they seem, so read each plan’s Electricity Facts Label (EFL) carefully before committing.
• Home size: Larger homes generally consume more electricity, while smaller homes and apartments usually use less. Look for plans built for your home size, like a bill credit plan that rewards consistently high energy usage.
• Energy Usage: Think about when and how you use power. Time-of-use plans can benefit some households with fixed usage patterns, while those with more flexible usage may prefer a fixed-rate plan.
• Contract Length: Decide if you prefer the flexibility of a shorter contract or the security of a longer one. If you don’t choose a month-to-month electricity plan, you can typically find contracts ranging from 6 to 60 months.
• Sustainability: Renewable energy plans let you support green energy initiatives without changing your usage habits or installing solar panels. Going green is easy because these plans are often competitively priced.
• Incentives: Some plans offer perks like bill credits, smart thermostats, loyalty rewards, and more. These can add value if they fit your lifestyle.
• Credit History: Most REPs run a credit check when you enroll. If you don’t meet their minimum credit score requirements, you’ll have to pay a deposit. If you have poor or limited credit history, you may want to consider a prepaid or no-deposit plan.

Every electricity plan in Texas comes with a document called the Electricity Facts Label (EFL). It outlines important plan details, like the average price per kilowatt-hour at different usage levels, contract length, base charges, ETFs, and more. While marketing headlines might make a plan look cheap, the EFL reveals the true cost once all the fees and conditions are factored in. Reading it carefully helps you avoid surprises later on.

What to Look For:

• Check the Rate: Rates are listed in ¢/kWh in three different tiers, 500, 1,000, 2,000 kWh. Compare based on your typical monthly usage; low-use customers may end up paying more due to base charges.
• Understand the Fees and Charges: Look for fixed base charges, unavoidable delivery (TDU) fees, and early termination fees if you switch before your contract ends.
• Review the Contract Terms: Pay attention to contract length (6–36 months), what happens when it expires (often higher month-to-month pricing), and any promotions or bill credits that come with conditions.

Electricity rates in Texas are tied to supply and demand. Because of this, rates can vary each season. During the summer, when air conditioners run constantly, demand skyrockets and wholesale electricity prices often follow. Winter cold snaps can have a similar effect, especially if the energy supply is strained. On the other hand, spring and fall typically bring milder weather and lower overall demand, which can mean more favorable rates for customers shopping during those seasons. Enrolling in an electricity plan during low-demand seasons can help you lock in a better fixed rate before prices climb.

Ready to find the right electricity plan for your household? Enter your ZIP code into Power Wizard’s smart comparison tool to instantly view dozens of REPs and plans in your area!