Fixed Rate vs. Variable Rate: Which Is Better?

Fixed vs. variable rate: Which is right for you?

Picking the best energy plan for your household isn’t always straightforward in Texas’ deregulated energy market. One of the first decisions you have to make is choosing between a fixed-rate plan and a variable-rate plan.

Variable rates have a bad reputation in Texas, after multiple instances of rate spikes that caused consumers’ bills to skyrocket. While they can be risky, there are a couple of scenarios where a variable-rate plan can provide a temporary energy solution.

However, fixed-rate plans are a safer bet because your rate is locked in for the duration of your contract. Texas energy shoppers generally have more options in this category and enjoy more affordable energy bills.

Your choice ultimately depends on whether you prefer the stability of a fixed rate or the flexibility of a variable rate. Regardless of which you select, Choose Texas Power can help you understand your options and ensure you find the right fit.

Understanding fixed-rate energy plans

Fixed-rate energy plans have a set electricity rate for the duration of your chosen contract. Energy contracts typically last between one and three years, allowing you to lock in your price. The main drawback to this type of plan is that you may have to pay an early termination fee (ETF) if you cancel your contract early. ETFs vary by provider and plan but often range from $150 to $350.

Expert advice: Every plan includes an Electricity Facts Label (EFL), a document that outlines key details about your plan. Review this resource before signing up to ensure you understand the fine print.

Pros	Cons
Energy bill predictability	May incur an ETF if you cancel early
Protection from price spikes	Could miss out on price dips in the market
Cheaper rates
Wider selection of plans

Who is a fixed-rate plan best for?

Fixed-rate energy plans are ideal for shoppers who want affordable energy bills and are comfortable committing to a contract. This plan eliminates stress about unexpected price increases because your rate is secured. Consider your energy needs to learn if your priorities align with a fixed-rate plan.

Energy need	Fixed rate compatibility
Affordability	✅
Protection from market volatility	✅
Flexibility	❌
Predictable energy bills	✅
Plan variety	✅
Renewable energy options	✅
No early termination fees	❌

 

Understanding variable-rate plans

Variable-rate plans are a more flexible energy option, because there is no contract and you have the freedom to switch plans at any time. The electricity rate with this type of plan is tied to the energy market, so it can fluctuate monthly with the wholesale cost of energy. Variable-rate plans involve greater risk because your rate can change month to month.

Pros and cons of variable-rate plans

Pros	Cons
Freedom to switch plans anytime	Higher rates
No contracts	Subject to price spikes
No early termination fees	Fewer plan options

Who is a variable-rate plan best for?

A variable-rate plan could work for shoppers who are willing to take on some risk in exchange for flexibility. Whether you’re moving or only have a few months left on your lease, a variable-rate plan can provide short-term electricity to help you get by.

Energy need	Variable rate compatibility
Affordability	❌
Flexibility	✅
Predictable energy bills	❌
Plan variety	❌
Renewable energy	❌
Avoid early termination fees	✅

 

Understanding the variable rate pitfall

Texans are wary of variable-rate plans, and there is plenty of evidence to support this concern. Intense weather patterns like heat waves, hurricanes, and cold snaps have often caused electricity rates to soar. Texas’ extreme summer heat is a prime example, driving up electricity use around the clock. As demand rises, so does the wholesale cost of energy as the power grid struggles to meet it. Variable-rate plans are dangerous in this scenario because your rate could skyrocket, leading to extremely expensive bills.

When does a variable rate plan make sense?

Overall, fixed-rate plans are a better pick. But there are a couple of scenarios where a variable-rate plan could be a good temporary solution.

1. During an expensive season. If energy prices are surging in your area, you may want to hold off on signing up for a fixed-rate contract. A variable-rate plan can help you wait until more favorable rates become available. While you may face high bills temporarily, you’ll be able to switch plans once prices drop without paying a penalty.
2. Quick energy during a transitional period. Whether you are moving homes or living somewhere short-term, a variable-rate plan could provide temporary energy. This way, you aren’t stuck in a contract while your energy needs are fluctuating.
3. Electricity for a secondary home. A variable-rate plan could be suitable for a secondary home that you don’t live in full-time. Since a secondary home likely has lower energy needs, a variable-rate plan could be a flexible option for a home you only stay in occasionally.

If you’re contemplating a variable-rate plan, call our team for guidance at the number on your screen. We can help you determine whether a variable-rate plan is a good fit for your situation.

Best overall: Fixed-rate plans

Our energy experts generally recommend a fixed rate over a variable rate due to the wider selection of plans, better affordability, and protection from market volatility. Fixed-rate plans enable you to better manage your energy costs because your bills will be more consistent.

That being said, there are scenarios where a variable-rate option may be a better choice. If your housing is in transition or you can’t commit to a contract, a variable-rate plan is a convenient short-term energy solution.

Discover your best fit on our marketplace

Regardless of your energy needs, Choose Texas Power can help you find an energy plan that matches your unique situation. We partner with Texas’ top energy providers to offer shoppers innovative energy plans at an affordable price. Here’s how to find your best fit:

• Enter your ZIP code: Browse energy providers and plans near you with accurate rates.
• Filter by your priorities: Our marketplace features filters to tailor the results to your preferences. Filter by provider, rate type, price, renewable energy, and more.
• Sign up in minutes: Once you find the right plan, you can sign up online or over the phone in minutes.

Another way to shop is through our AI-powered plan comparison tool. Simply take a quick quiz and share information about your home and preferences, and our tool provides you with a customized list of plan results tailored to your energy needs.

Fixed versus variable rate FAQs

Which is cheaper: a fixed rate or a variable rate?

Fixed-rate energy plans are typically cheaper than variable-rate plans. Our fixed-rate options are as low as 7–10 cents per kilowatt-hour (kWh), whereas variable-rate plans tend to hover around 20 cents per kWh.

Can I switch plans if I signed a contract?

Yes, you can always switch energy plans, but you may have to pay a penalty if you cancel your plan early. Review your Electricity Facts Label (EFL) to learn about any fees associated with your plan.

Why are variable-rate plans risky?

Variable-rate plans are risky because your energy rate isn’t secure and can change each month. This means that if the wholesale cost of electricity rises, so will your bills.

When is the best time to find cheap electricity deals?

Typically, the cheapest times to buy energy are spring and fall, as the weather in Texas is milder, leading to lower electricity demand. Prices can rise again in summer and winter due to more extreme weather conditions, resulting in higher energy consumption and costs.