Fixed vs. Variable Rate Electricity in Texas: How to Choose the Right Plan

If you’re shopping for electricity in Texas, you’ve already hit the first fork in the road: fixed rate or variable rate?

The pitch for variable plans is straightforward. As of February 2026, they average 11.7¢/kWh at 1,000 kWh among the plans we track. That’s about 3¢ less than the average fixed plan, or roughly $30 a month at that usage level.

But cheaper doesn’t always mean better. Variable rates can shift every billing cycle, and there’s no ceiling on how high they can go. Fixed plans cost more upfront, but your rate stays locked for the entire contract.

What Is the Difference Between Fixed and Variable Rate Plans?

The main difference is price certainty.

A fixed-rate plan locks your energy rate for a set term, typically 12, 24, or 36 months. Your per-kWh rate won’t change regardless of what happens in the wholesale market. Most fixed plans come with an early termination fee if you cancel before the contract ends.

A variable-rate plan has no locked-in price. Your Retail Electricity Provider (REP) can adjust the rate each billing cycle. In exchange for that uncertainty, variable plans are month-to-month with no cancellation fee. You can leave whenever you want.

Both plan types include TDU delivery charges from your local transmission and distribution utility. These charges are regulated and identical across all REPs in the same territory, so they don’t factor into the fixed-vs.-variable decision. You can see the full pricing breakdown for any plan on its EFL, which shows the total average price at 500, 1,000, and 2,000 kWh.

Texas used to allow indexed plans that tied your rate directly to wholesale market prices. After Winter Storm Uri in 2021, the state banned indexed products for residential customers. Today’s variable plans are set by the REP, not the wholesale market, but they’re still uncapped.

Beyond fixed and variable, you’ll find specialty structures like bill credit plans and free nights and weekends plans. These are variations on fixed-rate contracts with usage-based bonuses or penalties.

How Much Do Fixed and Variable Plans Cost Right Now?

As of February 2026, here’s how rates compare across all service territories in Texas.

The average variable plan is 3.0¢/kWh cheaper than the average fixed plan at 1,000 kWh. At that usage level, the difference works out to about $30 per month.

Keep in mind that a few expensive variable plans (one as high as 20.5¢) pull the average up. The typical variable plan runs closer to 10.0¢.

Rates vary by service territory. Shoppers in Dallas, Fort Worth, Houston, and other areas will see different numbers. Enter your ZIP code in the comparison tool below to see rates in your area.

What Are the Risks of a Variable Rate Plan?

Your rate can go up. There’s no limit on how much. That’s the risk of a variable plan.

Your REP sets the rate each billing cycle based on their wholesale costs, profit margin, and competitive positioning. Most months, changes are modest, but modest isn’t guaranteed.

Uri was an extreme case, and the indexed plans that caused the worst bills are now illegal. But the episode shows what can happen when electricity demand spikes and supply drops. Today’s variable plans aren’t indexed to the wholesale market, but your REP can still raise rates during high-demand months like July and August.

Price uncertainty has a psychological cost, too. With a fixed plan, you know your rate. With a variable plan, you’re checking your plan’s Electricity Facts Label each month to see whether it went up. For some people, the predictability of a fixed rate is worth the premium.

When Does a Variable Rate Plan Make Sense?

Variable plans aren’t always the wrong choice. In a few common situations, they’re the smarter move.

• You’re moving soon. If you only need power for a few months, a variable plan avoids the early termination fee on fixed contracts (median $180, up to $720).
• You’re testing a new provider. Not sure about a REP’s customer service? Start with their variable plan. If you don’t like it, switch without penalty.
• You watch rates closely. If you check rates monthly and will switch when prices rise, the month-to-month structure gives you that flexibility.
• Your fixed contract is about to expire. When your contract ends, the REP moves you to a pricier holdover rate. A variable plan you chose is usually cheaper than the default, but shopping for a new fixed plan ahead of time is the better move.

At 1,000 to 2,000 kWh/month, the 3¢ gap works out to $30–60/month in savings. Whether that’s worth the price uncertainty depends on your budget flexibility and how long you plan to stay at your current address.

How Do Contract Terms and Early Termination Fees Work?

The PUCT (Public Utility Commission of Texas) sets the rules for both plan types under Substantive Rule §25.475.

Variable Plan Rules

• Must be month-to-month (PUCT Rule §25.475(b)(11))
• Cannot have a termination fee (§25.475(b)(7))
• Rate can change every billing cycle with no mandatory advance notice
• You can switch providers at any time

Fixed Plan Rules

• Contract terms range from 3 to 60 months. Most common: 12 months (198 plans), then 36 months (116) and 24 months (89) (as of February 28, 2026).
• 98% of fixed plans have an early termination fee, ranging from $49 to $720 (median $180). Check the EFL for the exact amount.
• Your REP must send three written expiration notices during the final third of your contract (§25.475(e)(1)(A)). The last arrives at least 30 days before expiration.
• If you take no action, you’re moved to a default renewal product — typically pricier than shopping ahead. You can cancel it anytime without penalty.
• You can cancel without paying the ETF during the last 14 days before expiration (§25.475(e)(2)(C)(ii)). If your REP fails to send proper notices, they must keep you at your original rate.

If you’re weighing whether to pay the ETF to escape a bad rate, our early termination fee calculator can help you run the numbers.

How to Compare Fixed and Variable Plans for Your Area

The best way to decide is to see actual plans side by side, at your usage level and in your TDSP territory. Rates vary by location because each territory has different delivery charges.

Enter your ZIP code in the tool below and adjust the usage slider to match your household. Plans are sorted by cheapest first, so you can see how fixed and variable rates compare at your actual usage level.