What's the difference between fixed, variable and indexed rates?
Every plan's fact label names its type. The type decides who carries the risk when prices jump: you or your electric company.
On a fixed plan, the company takes the price risk, so it charges a cancel fee if you leave early. Direct Energy's fixed label, for example, says its price can change only for changes in delivery charges, ERCOT fees, or new laws. On a variable plan, you take the risk, so the company usually lets you leave anytime.
How did some Texans get $11,000 electric bills in 2021?
During Winter Storm Uri in February 2021, state regulators held the wholesale price of power at $9,000 per megawatt-hour, or $9 per kWh, for days. Customers on wholesale plans paid that price directly.
The wholesale price was about 57 times today's average home price. Texas average from EIA, July 2026.
Griddy, the best-known wholesale plan seller, charged its roughly 29,000 customers $29 million for energy during the storm, according to bankruptcy court records reported by The Texas Tribune. It went out of business. Lawmakers responded with House Bill 16, which bans retail electric companies from selling wholesale-indexed plans to homes, effective September 1, 2021.
Fixed vs. variable: which costs less?
Neither always wins. A fixed rate buys you a known price. A variable rate buys you freedom to leave, at the cost of not knowing next month's price.
The $150 cancel fee appears on the 12-month plans in our Direct Energy, Gexa and Green Mountain reviews. Check each plan's own label.
Should I pick a fixed or variable rate?
Answer three questions. Most Texas homes land on fixed.
- 1Will you live there 12+ months?
If yes, a 12-month or longer fixed plan locks your price through the summer. If you're moving within a few months, a variable plan avoids a cancel fee, though most fixed plans also waive it when you move.
- 2Could a $100 surprise hurt your budget?
If yes, go fixed. Variable prices can jump in July and August, right when your AC runs hardest.
- 3Does the fixed plan pass the 3-price test?
Some "fixed" plans hide bill credits that vanish below 1,000 kWh. Check the label's three prices, or run the plan through our plan cost calculator.
What happens when my fixed contract ends?
If you don't pick a new plan, your company moves you to a month-to-month plan, and that price can change every month. It's the most common way Texans end up on a variable rate without choosing one.
Companies must warn you before your contract expires. Direct Energy sends three, with the last at least 14 days before the end date.
The state says you can switch without an early termination fee if the switch happens no earlier than 14 days before your contract ends.
Set a reminder for a month before your end date, compare plans on Power to Choose, and read the new plan's fact label before you switch.
Fixed vs. variable questions, answered
Is a fixed or variable electricity rate better in Texas?
For most homes, a fixed rate of 12 months or more is safer because the energy price stays the same through the summer. A variable rate can make sense if you're moving within a few months, since it usually has no cancel fee.
Can a fixed electricity rate go up?
Only for pass-through costs. Fixed plans can change for changes in delivery charges, ERCOT fees or new laws, but the energy price itself stays the same for the term.
What happened to Griddy customers in Winter Storm Uri?
Griddy passed the wholesale price straight through, and regulators held that price at $9 per kWh for days. Its roughly 29,000 customers were charged $29 million for energy during the storm, and one Dallas customer got a bill of over $11,000 for less than a week.
Are wholesale electricity plans legal in Texas?
Not for homes. House Bill 16 bans retail electric companies from selling wholesale-indexed plans to residential customers, effective September 1, 2021.
Do variable rate plans have cancel fees?
Usually not, because the price can change month to month. Check the plan's fact label to be sure.
What happens when my electricity contract ends?
If you don't choose a new plan, your company moves you to a month-to-month plan whose price can change every month. You can switch without a cancel fee in the last 14 days of your contract.
How long should my fixed-rate plan be?
Long enough to cover at least one summer. A 12-month plan locks your price through the hottest months, and longer terms lock it even longer, but compare each label's prices and cancel fee.
Is a variable rate ever cheaper?
Sometimes, for a month or two, especially in mild weather. But you can't know next month's price, so most homes trade a little possible savings for the safety of a fixed price.
Sources and updates
Sources (8)
- The Texas Tribune, Texas Legislature approves bill banning residential wholesale electricity plans (republished by KERA, May 2021): the $9,000 per MWh price, Griddy’s 29,000 customers and $29 million, and the $11,000 bill.
- Texas House Research Organization, Bill analysis, HB 16: the ban on wholesale-indexed products for residential customers, effective September 1, 2021.
- S&P Global, Texas lawmakers advance eight energy bills (May 14, 2021): HB 16 sent to the governor and ERCOT barring Griddy from the market.
- Public Utility Commission of Texas, Electricity FAQs: the 14-day fee-free switch window and month-to-month service after a contract ends.
- Direct Energy, Electricity Facts Label, Auto Pay Texas 12, CenterPoint (dated September 30, 2026): 7.0444¢ energy charge, $4.95 base charge, CenterPoint delivery of $4.90 a month plus 6.5333¢ per kWh, and prices before sales taxes and the gross receipts reimbursement.
- Direct Energy, Terms of Service, Residential Postpaid: 10-day disconnection notice, deferred payment plan terms, average billing and Neighbor to Neighbor.
- Summer Energy, Terms of service filed with the PUCT: an example of a variable price product with no early termination fee.
- U.S. Energy Information Administration, Electric Power Monthly, Table 5.6.A: Texas average residential price of 15.88¢ per kWh, July 2026.
Changelog · last updated October 4, 2026 · 1 update
- October 4, 2026: Guide published: fixed, variable and indexed rates, the Winter Storm Uri lesson and HB 16, a side-by-side comparison, a 3-question decision guide and the rollover trap.
How to cite this page: The Day Company, "Fixed or variable electricity rate in Texas? How to choose without getting burned", updated October 4, 2026, https://theday.company/tx/fixed-vs-variable-rate.
This guide explains plan types; it isn’t financial advice. Check each plan’s current fact label before you sign. The Day Company is not affiliated with any electric company named here.