Electricity Smart Home

Understanding Different Electricity Plans and Choosing the Right One

The right energy plan can make all the difference. But how do you choose the best one for you? The answer starts with understanding the different energy plans and their rates. You can learn about these plans by reviewing each plan’s Electricity Facts Label (EFL). This is a legal requirement for energy providers.

Fixed Rate

When customers sign up for a fixed-rate electricity plan, their unit rate stays the same each month for the duration of their contract. This can provide price protection against energy market volatility and make it easier to budget for electricity costs. Fixed-rate plans typically have a contract term of 12-36 months. Customers can opt for a shorter time or longer, depending on their unique needs and energy prices. A fixed-rate energy plan offers consumers the advantage of stable and predictable energy bills because it locks in a consistent rate for the duration of the contract, shielding them from market fluctuations. This predictability provides peace of mind and allows individuals and businesses to budget more effectively without worrying about sudden spikes in their energy costs. Fixed-rate plans are an excellent choice for many consumers, especially those who want to avoid budgeting and energy usage risks. When you can predict your monthly bills, it’s easier to set aside money for expenses, savings goals, and other discretionary spending. When you’re on a fixed rate plan, you can better determine how much you need to spend each month and save money by avoiding unanticipated increases in your electricity rates. During low market demand, you can also use variable rate plans or TOU plans that offer lower prices during off-peak hours. Selecting the right Houston electricity companies is crucial to securing the best deal for your energy needs, as different providers offer varying rates, plans, and customer service levels. Researching and comparing options ensures that you can make an informed decision, potentially saving you money and ensuring a smooth and reliable energy supply.

Variable Rate

Choosing between a fixed or variable rate is one of the key decisions when shopping for electricity. If you opt for a fixed rate, your energy rates will remain unchanged throughout the contract term — regardless of market prices. On the other hand, variable rate plans allow you to take advantage of lower wholesale energy costs during periods of low demand. However, your energy rates can increase during high-demand times if the wholesale cost of power jumps. The best way to determine which plan is right for you is to assess your electricity consumption habits and needs. For example, heavy energy users can benefit from a longer-term fixed-rate plan, while light energy consumers might prefer a variable rate or time-of-use option. It’s also important to read the Electricity Facts Label (EFL) or Terms of Service for each plan you’re considering. These documents will give you a comprehensive view of all aspects of the project, including the price per kWh, usage tiers, contract length and potential fees. Some suppliers offer shorter terms, such as three- or six-month plans, which can be a great fit for customers who want to avoid ETFs or those on short leases and vacation homes. However, these plans may have a higher premium, and you may face cancellation fees if you cancel your agreement early.


Electricity plans come in all shapes and sizes. Choosing the right one requires looking at a few elements, including price and value-added features like green energy, rewards, no-deposit electricity, or smart thermostats. It also means carefully reading the plan description to understand how the rate is calculated and what you pay for. Time-of-use (TOU) plans use a special electricity pricing structure that shifts your electricity rates depending on when you consume energy. These are time-varying electricity rates, including peak, off-peak, and day/night pricing. The goal is to encourage customers to shift their electricity consumption to times when costs and demand are low, which supports a healthier environment and a more efficient electric grid. TOU plan descriptions typically display an average price per kWh line item that outlines the three usage tiers you’ll be charged. The first tier will be the base charge, and the price for each subsequent tier will increase. Some TOU plans will also display the electricity credits you’ll receive if you stay within certain monthly usage tiers. Once you’ve identified the average kWh range you expect to consume each month, look for a provider offering a competitive price per kW. You can find this by clicking the “Plan details” button on any plan page and selecting “View plan documents.” This will include a list of plan documents, including the average price per kW.


Prepaid electricity plans allow customers to purchase a fixed amount of energy upfront. Instead of receiving a monthly bill, customers receive daily updates from their Smart Meter showing how much electricity they have used and how much they have left to use. This allows customers to plan their usage more efficiently and conserve energy when possible. These types of electricity plans are popular with many different types of consumers. Because prepaid electricity doesn’t require a deposit or credit check, it can be a great option for those with poor or bad credit. It’s also a good choice for those with trouble affording a traditional electricity plan due to fluctuating rates or high-demand seasons. While some people worry that prepaid electricity will cause a spike in disconnections, consumer advocates say the opposite is true. Prepaid plans often result in shorter disconnections than those on traditional methods. Regardless of which type of electricity plan you choose, the important thing is that you understand all aspects of your rate and contract. When selecting a program, click the “Plan details” link to see the Electricity Facts Label (EFL). The EFL will open in a new window, and it’s a good idea to read this information carefully to ensure you get the best possible deal for your home or business.

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