Options in Electricity Plans

Rate Pricing Models

Retail electric provider (REPs) use different pricing models to come up with their rate and plan offers. Usually these are fixed-rate plans, variable rate plans and indexed rate plans.

The most familiar for consumers, perhaps, is the fixed-rate model. With a fixed-rate plan, your rate does not change all throughout your contract period. There are times, however, when your provider is authorized to change the rate, and these include changes in Transmission and Distribution fees, changes in ERCOT or Texas Regional Entity administrative fees, or changes resulting from federal, state or local laws that impose fees beyond your Retail Electricity Provider's (REP) control.

Variable rate plans, on the other hand, usually have no monthly contract or cancellation fees. However, as the name implies, the rate your provider charges you can vary from month to month. Your rate can go up or down based on the market and the discretion of your electric company.

For indexed rate plans, your provider ties the rate to a pricing formula connected to a publicly available index. In a sense, it is similar to variable rate plans, except that for indexed rate plans, your rate will increase and decrease together with the public index.

Terms Retail Electric Providers Use and What They Mean

Contract Length - Some electric companies offer plans without contracts ("month-to-month" plans), while others offer plans with contracts for as long as three years. Most contracts entail a penalty if you cancel before the contract expires, so check with your provider. Many plans will default to a month-to-month basis if you do not renew your contract. The month-to-month default price will likely be much higher, so you might want to renew.

Prepaid Options - Prepaid plans are on a "pay-as-you-go" basis. You will need to maintain a certain account balance to continue using the service. If your current account balance falls below the required amount, your service may be automatically disconnected.

Deposits - Electric companies may require a security deposit for new customers, either to be paid in full prior to start of service, or on your first bill.