In Texas, “fixed” and “variable” aren’t marketing words. Public Utility Commission rules define both. A fixed-rate plan holds its energy price for a term of at least three months. A variable-rate plan for a home can only be month-to-month, with a price that can change every cycle. For a plan you intend to keep, fixed is the answer for almost everyone; variable is a bridge.
What the rules say each one is
The retail-products rule (rule 25.475) defines three kinds:
- Fixed rate. A term of at least three months and a price that holds for the whole term, with three exceptions: changes in the delivery utility’s charges, in ERCOT or Texas Reliability Entity fees, and new fees or laws. Marketing anything else as “fixed” is prohibited.
- Variable price. For a home, month-to-month only: 31 days or less, with no termination fee or penalty. The price can change from one cycle to the next.
- Indexed. A price tied to an index. Prohibited for homes since February 1, 2022; the wholesale-indexed kind Griddy sold until the February 2021 storm went first, in September 2021.
The Electricity Facts Label has to state which type a plan is, and for a variable plan, the first cycle’s price, any cap on increases, and where to find the price history. If no cap is stated, there isn’t one.
| What the rule sets | Fixed rate | Variable price |
|---|---|---|
| Term | At least 3 months | Month-to-month only (31 days or less) |
| Energy price | Constant for the term | Can change each billing cycle |
| What can still change | Delivery charges, ERCOT fees, new laws | Everything |
| Early termination fee | Allowed; waived in the last 14 days and when you move | Not allowed |
| Where you meet it | New-customer offers | The default plan after a contract expires |
What “fixed” fixes, and what it doesn’t
Fixed means the energy charge: the cents per kWh your provider keeps, plus any monthly base charge. It doesn’t mean your bill. A large share of a Texas bill is the delivery utility’s charge, passed through at cost on every plan, fixed or not, and changed at least twice a year, usually around March 1 and September 1. When a fixed-rate bill rises mid-contract and the energy charge hasn’t moved, that is the line to check. Which utility is yours depends on your address; see delivery utilities.
Where most people meet a variable rate
Most Texans arrive on one by default. When a fixed contract expires and you haven’t picked a new plan, the rule requires the provider to move you to a default renewal product: month-to-month, cancellable at any time without a fee, priced on terms that can change monthly. That is a variable-rate plan, usually priced above what the same provider offers new customers. The no-fee exit is the point: don’t stay longer than it takes to pick a plan. See when to switch.
When a variable rate makes sense
As a short bridge, with a date on it.
- A few weeks between leases, or a place you will leave before a 3-month contract would end.
- Moving the calendar. A 12-month plan signed in August ends in August; a month or two on month-to-month can shift the end date into spring or autumn.
- A move with an uncertain date. A fixed plan has no termination fee when you move with proof, so this matters less than it looks, but month-to-month means nothing to prove.
In each case, what the price can become is limited only if the label states a cap.
When it doesn’t
As a plan you intend to keep. A variable rate puts the price risk on you: the grid is under most strain from June through September, a month-to-month price can follow wholesale power up, and nothing requires it to come back down as fast. A fixed plan tells you the energy price for the whole term; a variable plan tells you this month’s. For how long to fix, see 12, 24 or 36 months.
The fixed-rate trap that has nothing to do with variable
The usual way a “fixed” plan surprises people isn’t the rate. It is a bill credit that comes and goes. A plan can advertise 7¢ at 1,000 kWh with a fixed energy charge of 12¢ because a credit lands in any month you use 1,000 kWh or more. Use 950 kWh and the credit vanishes; the rate was fixed the entire time. They comply with the rule, since the label’s averages include the credit, and they are why two plans with the same advertised price can cost hundreds of dollars apart over a year. See bill credit plans explained.
What to do
- Read the plan type on the label. If it says variable, read the first-cycle price and the cap line, and set an end date.
- For anything longer than a couple of months, take a fixed-rate plan; delivery charges will move anyway.
- On a fixed-rate plan, check for bill credits and minimum-usage fees. “Fixed” describes the rate, not the credit.
- Never sit on the default renewal plan. It is variable, free to leave, and usually the most expensive electricity you will buy.
WattaWatt prices fixed-rate plans on your own 12 months of usage, credits and delivery charges included, so two plans that both say “fixed” are compared on what a year costs, not on the word.