Choosing the Right Fixed Rate Electric Plan

Introduction

As a resident of Texas, you have the power to choose your electricity provider and plan. One popular option is the fixed rate electric plan, which can provide stability and predictability in your monthly electric bill if you choose the right plan for your usage level.

With so many options available, it can be easy to pick what seems to be the lowest rate and then end up paying more than you thought you would. In this article, we'll go over the common "gotchas" that come up when choosing this type of rate, and we'll explain the best way to find a fixed rate that won't end up costing you more than you expected.

What is a Fixed Rate Electric Plan?

A fixed rate electric plan is a type of electricity plan where the rate you pay for your electricity usage remains the same throughout the contract term. This means that the price per kilowatt-hour (kWh) you pay for electricity will not fluctuate, regardless of changes in the wholesale electricity market or weather patterns.

Your bill will depend on how much electricity you use, but the rate you pay will remain constant.

Fixed Rate "Gotchas"

While a fixed rate plan sounds simple enough, some of these electric plans still have built in usage tiers or usage-based credit discounts that can drastically affect your monthly bill if your actual electric usage needs do not match the plan structure.

To achieve a lower advertised price, some providers offer fixed rate plans that have usage-based pricing tiers or bill credits. While these are still technically fixed rate plans, you need to carefully decide if the plan fits into your electricity usage patterns.

If the fixed rate plan you choose has an advertised price that is achieved through a discount that only applies if you use more electricity than you actually do, the discount may never kick in, which means you would not receive the lower rate that was advertised. This is what we call the 1,000-kilowatt Trap

Benefits of a Fixed Rate Electric Plan

If you choose a fixed rate plan that does not have a tiered structure or you decide that a tiered fixed rate works for your usage patterns, a fixed rate electric plan offers several benefits to customers, including:

• Budget predictability: With a fixed rate plan, you can easily predict your monthly electricity bill, which can help you plan and budget your expenses.
• Protection against price spikes: If electricity prices suddenly increase due to market factors or weather patterns, you will be protected from paying higher rates because your rate is fixed.
• Long-term savings: If you lock in a low rate, you can save money over time compared to customers who choose variable rate plans.
• Peace of mind: With a fixed rate plan, you don't have to worry about your bill increasing unexpectedly, which can provide peace of mind and reduce stress.

Things to Consider When Choosing a Fixed Rate Electric Plan

Before choosing a fixed rate electric plan, there are a few things to consider:

• Contract length: Fixed rate plans typically require a contract commitment, ranging from 6 months to 3 years. Make sure you choose a contract length that works for you.
• Early termination fees: If you decide to cancel your contract early, you may be subject to early termination fees. Make sure you understand the fees associated with your plan.
• Electricity usage: A fixed rate plan may not be the best option if you have highly variable electricity usage, as your bill will still vary based on usage.
• Usage-based discounts: Check if the rate your choosing has a single rate for all usage or if you have to use a certain amount of electricity to benefit from usage-based discounts.
• Market trends: While a fixed rate plan protects you from sudden price increases, it may not always offer the best value if wholesale electricity prices are low.

Choosing the Right Fixed Rate Plan