How to Pick the Right Electricity Plan
Are you considering electricity providers in Texas? Choosing the right energy plan for your needs can be complicated. To help you make an informed decision, this article will explain the different types of energy plans, pricing structures, and rate structures available to Texas deregulated energy customers.
Types of Electric Plans
The first step to picking an energy plan is understanding what type of plan it is. This is different from the rate it carries, though some terms may appear similar. The different types of plans are as follows:
- Fixed: A fixed electricity plan is exactly what it sounds like. The terms and rates inside will not change for the duration of your contract. This makes it a good choice for people who like stability and don't want to worry about fluctuating prices on the market.
- Variable: A variable electricity plan comes with a little less stability than a fixed plan, as the rate you pay for electricity changes with fluctuations in the energy market. This type of plan's stability (or instability) depends on its rate structure, but the main thing to remember is that it will change over time.
- Indexed: Indexed plans are less common than the previous two, but you may still see them. An indexed plan is similar to a variable plan in that the rate changes over time, but it is calculated in a different way. Instead of calculating your rate based on the market value of electricity, your provider will base it on a commodity index. How much variation you'll see depends on the formula your provider uses, so be sure to carefully read the contract before committing.
While you may see “prepaid plans” referenced frequently, pricing doesn't really count as its own plan type. We've included it here in an effort to be clear about your options.
- Prepaid: Prepaid plans are, unsurprisingly, plans that require you to pay for electricity before you use it. People who choose these plans often do so because they want to stick to a certain budget and know ahead of time how much they will be spending. Additionally, prepaid plans are a popular deposit- and credit check-free option. If you choose a prepaid plan, it is important to note a few quirks to this payment structure, such as automatic disconnects, limited eligibility, and higher rates.
- Postpaid: This is the most popular choice for energy bills. Like many other bills, your energy company will send you the invoice at the end of the month. All plans are postpaid unless they specifically state otherwise.
- Bill Credits: Bill credits are available on some fixed rate plans and function as a reward for using a certain amount of energy in a given month. For example, your provider may offer a $40 reward if you use between 1000 and 1200 kilowatt-hours (kWh) in a month. This “usage bucket” is set in your contract and will not change. This is a good option if you know you almost always fall into the usage bucket the provider has designated.
Types of Rate Structures
The second piece to energy plans is the rate structure. This is where things get confusing, as rate structures use similar terminology to plan types. Think of rate structures as the terms of your energy plan ??" what frequency you're charged, when it changes, and more. Rate structures affect cost, but it's important to remember that rate structure and plan types are not the same. You can find rate structures listed in three ways:
- Time-of-Use (TOU): TOU rates change throughout the day. Typically, they are most expensive during hours of high demand and cheapest during hours of low demand. Keep in mind that there is more than just peak and off-peak hours; there are also afternoon, evening, and super peak hours.
- Demand-Based (DB): DB plans are more complex than TOU plans and are typically used by commercial customers. This rate structure accounts for peak demand hours, but your kWh usage is also taken into consideration. Prices vary depending on how much electricity you use during peak demand hours.
- Flat: Flat rates are the simplest rate structures available. Essentially, your electricity rate remains the same throughout the duration of your contract. No matter when you use electricity, you will be charged the same flat rate for each kWh.
Deregulated electricity markets, like those in Texas, provide customers with multiple electricity providers to choose from when selecting their electric plan. Each provider offers a variety of plans with differing rates, contract lengths, and rate structures. To make the process of comparing providers and rates easier, Choose Texas Power provides customers with several resources.
- The Power To Choose website is a great starting point to compare rates and find the best electric plan in Texas. This website lists all of the available plans in a particular area and allows customers to compare and filter plans based on features and preferences.
- No Deposit Electricity provides customers with no-deposit electricity plans. These are often prepaid plans, and they allow customers to skip the credit check, deposit, and connection fees that traditional plans require.
- Energy Bill Information helps customers understand their energy bills. This guides customers through the various components of a typical electricity bill and offers advice on how to reduce their electricity usage and save money.
- How To Choose Providers educates customers on what to consider when choosing an electricity provider. This resource explains the different types of electricity plans, advantages and disadvantages of each, and more.
- How To Switch Providers is an essential resource for those looking to switch electricity providers. This resource covers the process of switching providers, what to expect during and after the switch, and more.
Electricity rates in Texas depend on a number of factors, such as the area in which you live, the energy plan you select, and more. To help customers find the best electric rate for their needs, Choose Texas Power provides resources such as our rate comparison tool and energy calculator.