Choosing an energy provider in Texas can be a bit of a confusing process. Not only do you have numerous retail energy providers (REPs) to choose from, but each company can also offer different types of plans.
There is no one-size-fits-all energy plan. What works for your neighbor down the street might not be the best choice for you.
One of the most popular options is a fixed-rate electricity plan. Here, we’ll dive a little deeper into this type of plan to help you determine whether it’s the best solution for you.
What Are Fixed-Rate Electricity Plans?
A fixed-rate electricity plan allows you to lock in a set electricity rate for the duration of the contract you sign. In other words, you pay the same rate per kilowatt-hour (kWh) no matter what happens to electricity prices outside of your plan.
Note: You may have a fixed rate, but that applies only to your electricity usage. You may have additional fees applied to your bill, including taxes, electricity delivery fees, and other charges from your REP.
Benefits of Fixed-Rate Plans
Fixed-rate electricity plans are one of the most popular options in Texas. Here are some of the top reasons why.
Your Bill Is Unaffected by Market Prices or Market Conditions
Electricity prices can increase significantly during the hot summer months in Texas. That’s because consumers are using their air conditioners (and, therefore, more energy) to keep their homes comfortable. Exceedingly cold winters, severe storms, and other weather conditions can affect prices, too, as can factors such as the price of fuels, power plant costs, and wholesale electricity prices.
When you sign a contract for a fixed-rate electricity plan, you secure a specific rate that will not change until the contract ends. No matter how much rates increase, your price per kilowatt-hour won’t change. If you sign a 24-month contract for $0.12 per kilowatt-hour, you’ll pay $0.12 per kilowatt-hour for the next two years, regardless of any price increases that may occur.
There Is More Consistency in Monthly Bills
Now, a fixed-price electricity plan doesn’t mean you pay the same amount every month (that’s a flat-rate plan). As mentioned earlier, the price you pay per kilowatt-hour stays the same. However, if you use more energy in a given month, your bill will be higher. Conversely, you’ll pay less for months when you use less energy.
Even if your bills fluctuate a bit each month, you’ll still have more consistency and predictability than you would with some other plan types. That can help you avoid being caught off guard by unexpected rate hikes and expensive bills you weren’t anticipating.
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You Can Budget Around Your Electric Bill
When your energy bills fluctuate unpredictably every month, budgeting becomes a challenge. An unexpectedly expensive electricity bill can mean you have less money to put toward savings, miscellaneous spending (e.g., dining out, entertainment), and other financial goals.
With the greater predictability of a fixed-rate electricity plan, it becomes easier to create and maintain a budget. You can more accurately judge how much you’ll need to set aside for your energy bill based on how much electricity you use rather than being taken by surprise and having to worry about where you’re going to pull money from to cover your energy costs.
Cons of a Fixed Electricity Plan
Like other electricity plans, fixed-rate options have their benefits as well as drawbacks. Before you decide what type of plan is best for you, you’ll want to look at a few potential disadvantages of selecting a fixed-rate plan.
If Energy Prices Fall, You’re Stuck
Plans with fixed electricity rates require contracts. You stay with your energy provider for a designated amount of time, generally a few months to a few years, and the provider keeps your electricity rate the same for that entire period.
The same benefit of being able to lock in your electricity rate can also be a drawback, though. Your contract might protect you from rate increases, but it also means that you won’t be able to take advantage of decreasing rates. You’ll have to wait until your contract ends before you can change your plan. There are times it is financially beneficial to end a contract early if the market decreases.
Being in a contract also means you’re subject to fees or additional charges your REP may tack onto your fixed electricity bill. If those fees increase, your bill increases, even though your electricity rate stays the same.
You Face Termination Fees If You Cancel During the Contract Term
Although a fixed-rate plan locks you into a contract, that doesn’t necessarily mean you can’t get out of it. However, it’ll likely cost you. Many REPs charge early-termination fees if you decide to cut ties before the end of your term. Even if you find a better rate that will save you money in the long run, those fees can deter you from switching.
How Do Fixed Plans Differ From Variable-Rate Plans?
Variable-rate plans are a popular alternative to fixed-rate options. Instead of requiring a contract, these plans go month to month. If you find a lower rate with another REP, you can switch plans without having to wait for the end of a term or paying exorbitant early-termination fees.
The downside to variable plans is that you’re subject to rate changes at any time. If something happens that causes a spike in energy prices, you’ll see a significant increase in your electricity rate when your next bill arrives. Surprises like that can be understandably shocking. They can also throw your finances off balance. Although you can move to a different REP, you may find that everyone has higher rates. In essence, you wouldn’t save as much as you might have if you had signed up for a fixed-rate plan at a lower rate earlier.
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When Is Fixed-Rate the Type of Plan for You?
Fixed-rate electricity plans in Texas offer greater predictability every month, helping you avoid unpleasant billing surprises. Although your bill might fluctuate somewhat, you won’t see the same drastic increases that someone on a variable-rate plan might when energy prices climb. If you plan on remaining in your home for a while, choosing this type of plan might make the most sense. It can also help you avoid the time and stress involved with having to switch REPs every time rates go up.
Are you looking for the best fixed-rate electricity plans Texas has to offer? Let Power Wizard help. You can more quickly and easily compare the top plans and choose the one you feel makes the most sense for you. Visit Power Wizard today to get started!
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