When to Sign Up for 3 Month Electricity Plans
2 minute readThree-month electricity plans can be a smart choice if you time them right. In Texas, electricity prices fluctuate throughout the
Fixed vs Variable Rate Electricity Plans: Which is Best?
Compare fixed and variable-rate Texas electricity plans
9 minute read • Last update March 2026
Let’s explore the key differences between fixed-rate and variable-rate electricity plans in Texas.
Fixed rates vs. variable rates
The main difference between fixed-rate and variable-rate plans lies with the energy charge (what you pay per kilowatt-hour to your electricity provider).
On a fixed-rate plan, the energy charge is locked in for the duration of your contract. With a variable-rate plan, the energy charge is subject to change on a monthly basis.
- Fixed-Rate: An electricity plan with an energy charge that is locked in for the entirety of a contract. The energy charge does not change within a contract.
- Variable Rate: An electricity plan with an energy charge that is subject to change each month based on changes to the wholesale electricity market.
On both types of plans, the TDU delivery charges paid to your regional utility company are subject to change at least every 6 months based on rate increases or decreases set by your Transmission and Distribution Utility and approved by the Public Utility Commission of Texas. These changes are outside the realm of your electricity provider’s control.
| Fixed | Variable | |
|---|---|---|
| Energy Charge | Locked in for the duration of the contract | Subject to change each month based on wholesale market conditions |
| Budgeting | Easier to set a budget, better for households that prefer consistency | Difficult to predict costs due to frequent changes in the energy charge |
| Spike Protection | Yes, energy charge stays the same even during wholesale price increases from extreme weather | No, variable energy charge increases risk and exposure to price volatility |
| Contract Length | Ranges from 3-60 months; typically 12, 24, or 36 months | Month-to-month with no long-term commitment |
| Predictable | Yes, the price is locked in | No, the price is subject to change |
| Flexible | Lower flexibility because switching may result in an early termination fee | Very flexible, switch plans or providers whenever you want |
| Early Termination Fees | Yes, early termination fees apply | No, there are no early termination fees |
| Recommended for | Homeowners, long-term renters | Very short-term renters, landlords between renters |
What is a fixed-rate electricity plan?
Fixed-rate electricity plans are plans with a set rate per kWh that does not change for the duration of your contract, regardless of changes to market conditions like weather and demand. With your price per kWh locked in, you have the ability to predict your electricity costs.
This allows you to budget with ease and eliminate financial surprises on your monthly bill. This is precisely what fixed-rate electricity plans offer. Fixed-rate plans are particularly beneficial for those living in extreme climates or anyone who prefers consistent budgeting.
Fixed rate vs flat rate plans
Fixed-rate plans should not be confused with flat-rate plans. Flat rate plans offer the exact same price (usually a very high base fee) each month for specific ranges of energy use. For example, if you use 0-500 kWh of energy, your bill may be $99.
If you consume 501-1000 kWh, your bill may be $159. And if you were to use 1001-2000 kWh, your bill could be $259. While flat rate plans offer even more predictability, you can often be overcharged for power.
With a flat rate plan, it’s your price per kWh that remains the same at different levels of usage, not the final bill. That being said, it’s important to note that with a fixed rate plan, your bill will change month to month based on your usage.
They are generally more predictable and manageable than those experienced with variable-rate electricity plans. In essence, fixed-rate plans provide stability and predictability in a world where energy prices can fluctuate wildly.
Pros of fixed-rate plans
Fixed-rate plans offer the following benefits:
- Consistent pricing. By locking in a rate per kWh, you are safeguarded from energy market volatility. Even if market prices soar, your electricity rate remains stable, allowing for more effective budgeting and potential savings over the long term.
- Eliminate the need for frequent comparison shopping.
- No need to constantly monitor energy rates and switch plans or suppliers.
- Save time and effort.
- Provide peace of mind.
Fixed-rate energy plans are the best option for most people, but not everyone. If you prefer flexibility and the ability to switch plans when energy rates change, a fixed rate plan may not be the best option for you. Nevertheless, for those seeking stability and predictable costs, fixed-rate plans are a solid choice.
Cons of fixed-rate energy
While fixed-rate plans offer stability and predictability, they also come with some drawbacks:
- Inability to take advantage of lower market rates when energy prices drop. If you’re locked into a fixed rate plan, you might miss out on potential savings during periods of low energy prices.
- Some fixed-rate plans offer high early termination fees if you decide to end the contract before its completion. This can be a significant consideration for those who may need to move or switch electricity providers before their contract expires.
At BKV Energy, our early termination fee decreases the longer you are a customer – it’s only fair.
What is a variable-rate electricity plan?
Variable-rate electricity plans are plans with prices per kWh that fluctuate based on market conditions. This means you could potentially save money during periods of low demand or when market prices drop. However, the rate may also increase if market conditions drive energy prices up.
The main factors influencing variable-rate electricity plans are current electricity market conditions. This means that with a variable-rate plan, you get to ride the waves of the energy market, potentially benefiting from lower prices but also facing the risk of higher costs during price spikes.
In Texas, it’s very likely that market conditions will push prices higher throughout the summer due to intense demand and high production costs across the state.
Pros of variable rates
Variable rate plans offer several advantages, including:
- The opportunity to capitalize on lower prices in the energy market. If energy prices drop, you can enjoy the benefits of lower rates without being locked into a higher rate, as is the case with fixed-rate plans.
- There are no cancellation fees. This provides you with the flexibility to switch providers if a better deal becomes available or if your energy needs change.
- Freedom from long-term contracts. This can be particularly appealing to those who prefer not to be tied down.
However, it’s essential to be aware of the potential drawbacks of variable rate plans. While they offer flexibility and the chance to save money during low-demand periods, they also come with the risk of unpredictable costs and potential budgeting challenges due to market fluctuations.
Cons of variable energy rates
The primary disadvantages of variable rate electricity plans include:
- Lack of predictability. Since rates fluctuate in response to market conditions, it can be challenging to accurately predict your monthly electricity bill. This can make budgeting more difficult, especially for those who prefer a stable and consistent monthly expense.
- Potential for higher rates if market prices rise. While variable rate plans offer the opportunity to save money during periods of low demand and falling prices, they also expose you to the risk of increased costs when market prices climb. This unpredictability can be a significant concern for those on a tight budget or with limited tolerance for risk.
Variable vs fixed-rate electricity: which is better?
Fixed-rate electricity plans are a better option for the majority of homeowners because with a fixed rate, you are locked into the same energy charge for the duration of your contract—no matter what happens to wholesale electricity prices. You are shielded from price volatility that occurs due to weather, seasonality, renewables, and other contributing factors.
There are only a few specific scenarios where a variable rate can be more affordable, such as if you are going to be living somewhere temporarily (1-2 months) and it happens to be spring or fall when the weather is milder.
By evaluating your energy usage habits, location, and market conditions, and comparing different providers and plans, you can make an informed decision and select the electricity plan that best suits your lifestyle.
Let’s dive into the pros and cons of fixed and variable-rate energy plans so you can make the best choice for your wallet, your home, and your family.
Which type of electricity plan is right for you?
Generally, we recommend Texans sign up for fixed-rate plans due to the stability and predictability that come with those plans. With our very long and hot summers, you are more likely to spend less on energy with a fixed-rate plan.
Ultimately, the choice between fixed and variable-rate electricity plans depends on your personal preferences, risk appetite, and energy consumption habits. If you prefer flexibility and the potential for cost savings during low-demand periods, a variable rate plan may be more suitable.
Both fixed and variable-rate plans have their pros and cons, and the best option for you will depend on your unique circumstances and priorities.
By carefully considering your energy usage habits, location, and market conditions, you can make an informed decision and choose the electricity plan that best meets your needs.
What is a good fixed-rate electricity price?
A good fixed-rate for a Texas electricity plan will vary based on your location, the contract length, the time of year, and current market conditions.
BKV Energy’s fixed-rate Bluebonnet plan comes in varying term lengths. We also price well below the market average to ensure our customers get an affordable rate. Shop our plans here.
How to determine what type of plan you have now
The easiest way to determine whether your current plan has a fixed or variable rate is to ask your electricity provider to share your plan’s Electricity Facts Label document. It will specify in the “Rate Type” section whether the plan is fixed or variable.
Not sure who your electricity provider is?
Learn more about other types of electricity plans
Your options extend beyond fixed and variable-rate plans. Let’s explore the other types of plans available in Texas’s deregulated residential energy marketplace.
Free nights and free weekends
With a free nights plan, the energy charge falls to 0 cents per kWh during a specified timeframe overnight. Beware of extra high energy charges during the day. It can be difficult to shift enough of your kWh usage to the nighttime in order to actually save money with this type of plan.
Free weekends plans are similar. The energy charge is free during a specified window of time over the weekend. The weekday energy charge will be much higher than a regular fixed-rate plan. Again, it can be difficult or impossible to shift enough of your household’s energy consumption to the weekend to outweigh the increased costs during the week.
Bill credit plans
Bill credit plans are easily identifiable by their shockingly advertised average price at one of the three usage levels listed on an Electricity Facts Label (500, 1000, or 2000 kWh).
Due to the wide range of monthly energy consumption in most Texas households throughout the year, it is not realistic to assume you will use the right amount of energy every month to earn the credit. When you don’t earn the credit, you end up paying much more than you’d expect.
Base charges
Some fixed-rate plans have an extra fee added to each bill called a base charge. These extra costs range from $4.95 to $14.95 per month, depending on the provider and the plan.
We recommend avoiding base charges because you end up paying more no matter how much power you use during a billing period.
Minimum usage fees
A plan with a minimum usage fee will add an extra charge to your bill if you do not meet a specific kWh usage threshold during a billing period. For example, a provider may add $9.95 to your bill if you don’t use at least 800 kWh. At BKV Energy, we do not include minimum usage fees on any of our plans because we do not want to punish Texans for conserving energy.
Prepaid electricity plans
When you sign up for a prepaid plan, you pay for your energy usage in advance. These plans usually come without deposit requirements and smaller early termination fees. Unfortunately, they often come with incredibly expensive energy charges that will eventually outweigh what you would have paid for a deposit.
Indexed energy plans
Indexed or wholesale electricity plan prices were tied to fluctuations in the wholesale energy market. After the Winter Storm of 2021, the governor of Texas made it illegal to offer indexed electricity plans.
Frequently asked questions
What is a fixed-rate electricity plan?
A fixed-rate electricity plan is a type of energy plan where the energy charge is locked in for the duration of the contract, even when market conditions change. These plans come with longer-term commitment and early cancellation fees.
What is a variable-rate electricity plan?
A variable-rate electricity plan, or a month-to-month plan, is a type of plan where the energy charge is subject to change monthly based on changes to market conditions. There are no long-term commitments and no early cancellation fees.
Is a fixed or variable-rate electricity plan better?
In most cases, fixed-rate electricity plans are the better option because they provide predictability and stability during market volatility, such as extreme weather, which can make the cost of energy more expensive. However, a variable-rate plan is better for someone who requires more flexibility, such as a short-term renter or someone who is about to move.
What factors cause price changes in variable-rate plans?
Variable-rate plans increase or decrease based on the price of wholesale electricity. The price of wholesale electricity changes with the weather and other market conditions that influence the price of power that providers pay to power generators.
For example, when extreme heat hits Texas, grid demand increases because homes and businesses use more power when they turn up their air conditioners to keep cool. Increased demand leads to an increased price. This is why variable rates are often much higher during the summer.
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