Short Term vs Long Term Energy Contracts
Texas electricity providers offer a wide range of electricity contract term lengths from 1 to 36 months, and in some extreme cases, even 4 or 5 years.
Choosing between them can become complicated — how do you know which one is the best deal offering the most savings? It’s all about finding a balance between security and savings.
Here’s everything you need to know about selecting the best term length for your budget.
Pros and Cons of Short Term Contracts
Upsides to Short Term Contracts
Short term contracts (such as those less than 1 year long) offer more freedom for people who enjoy shopping around for lower electricity prices. They are easier to get out of when you find a lower rate.
They are also great for folks who are staying somewhere for a short amount of time. You can sign a deal for the duration of your extended stay without worrying about a high cancellation fee.
The Downside to Short Term Plans
Short term plans are not without their drawbacks. If you sign a short contract, the entire market could swing in the wrong direction during the term. When it comes time to sign up again, you may get stuck with a high rate.
Pros and Cons of Long Term Plans
Advantages of Long Term Energy Contracts
The most significant benefit to signing a longer term contract (such as one longer than 2 years) is the stability. When your rate is locked in for the duration of your contract, you are insulated from negativity in the marketplace due to changes in cost of production and weather. This means you can better predict your finances for the foreseeable future.
Another benefit? You don’t have to worry about finding a plan. You can set your account to autopay and get on with the rest of your life.
Disadvantages of Long Term Electricity Plans
There are a couple downsides to a longer term plan. First, if you find a plan part of the way through your current contract with a lower rate, you may get stuck paying a high early termination fee.
Second, if you cannot afford the early termination fee while the market drops, you are stuck paying a higher rate for electricity until your plan ends.
Extra Long Energy Plans
Some Texas electricity providers may offer plans that are outrageously long with 4 to 5 year terms. These plans are backed by wild guesses, stabs in the dark, and crystal ball predictions about the distant future.
Providers offering these plans do not know how state, national, and global economics, weather patterns and climate change, or updates to the Texas power grid regarding renewable energy sources and battery storage will impact the cost of electricity that far in advance.
We do not recommend signing up for plans this long because the early termination fees may be astronomical and if the market swings in the right direction for the consumer, you will not be able to take advantage of the potential savings in your household.
The Best Term Length
The ideal term length for residential electricity is 9-24 months. Plans like these offer the perfect balance between rate stability, potential early termination fees, and flexibility to switch to another plan or provider. These plans are backed by much more reasonable assumptions about the future of energy production costs, updates to the Texas grid, weather, and climate change.
At BKV Energy, we take this one step further. Our Bluebonnet plan automatically enrolls you in our Blend & Extend program.
Our Blend & Extend software automatically searches for opportunities to lower your rate in the middle of your contract. If we find an opportunity, we’ll give you the option to switch and save without paying a cancellation fee.
When you sign up for BKE Energy’s Bluebonnet plan, you get the perfect combination of factors:
- Price stability
- Low early termination fees
- Opportunities to lower your rate for free
- Rates backed by realistic market data
Enter your zip code to explore plans and prices in your area. Contact us today if you have any questions.