Best for: Anyone who’s tried to compare electricity plans and gave up after 10 minutes.
If you live in a deregulated electricity market, you have choices. Dozens of them. Maybe hundreds.
Fixed rates, variable rates, free nights, free weekends, bill credits, usage credits, tiered pricing, time-of-use pricing. Every plan has a gimmick, and every gimmick is designed to make comparison impossible.
Link to Electricity plan Calculators
Let’s break down what each plan type actually means and who benefits from it.
Fixed-Rate Plans
You pay a set rate per kilowatt-hour (kWh) for the entire contract term, usually 6, 12, or 24 months.
Example: Rate is $0.12/kWh. You use 1,000 kWh. You pay $120 (plus delivery charges and fees).
Fixed-rate plans protect you from price spikes. When wholesale electricity costs go up, your rate stays the same. When they go down, your rate also stays the same.
Best for: People who want predictable bills and don’t want to think about their electricity plan.
Downsides: You might pay more if wholesale prices drop. Early termination fees if you cancel before the contract ends.
If you’re choosing one plan and forgetting about it, this is the one.
Variable-Rate Plans
Your rate changes month to month based on wholesale electricity costs.
Variable plans usually start with a low introductory rate, then adjust monthly. When wholesale prices are low, your rate drops. When they spike, your rate goes up.
Best for: People who monitor electricity prices religiously or need short-term coverage between moves.
Downsides: Your rate can double or triple during extreme weather. Rates often creep up after the introductory period ends.
Variable-rate plans are gambling. Sometimes you win. Sometimes the market spikes and you get a $600 bill for a month when you normally pay $150.
Most people should avoid these unless they’re willing to switch plans frequently.
Time-of-Use (TOU) Plans
Your rate depends on when you use electricity. Peak hours (usually 2 PM to 7 PM on weekdays) cost more. Off-peak hours cost less.
Example: Peak rate is $0.20/kWh during 2-7 PM weekdays. Off-peak is $0.08/kWh all other times. If you use 1,000 kWh and 300 kWh happens during peak hours, you pay $116 total instead of $120 on a fixed plan.
Best for: People who can shift usage to off-peak hours – run dishwashers overnight, delay laundry, avoid AC during peak times.
Downsides: Peak rates are significantly higher than fixed rates. If you work from home or have kids home after school, peak hours are unavoidable.
TOU plans can save money, but only if you actively manage when you use electricity.
Free Nights and Weekends Plans
Electricity is free during certain hours (usually 9 PM to 6 AM on weekdays and all day on weekends), but you pay a higher rate the rest of the time.
Example: Free from 9 PM to 6 AM weekdays plus all weekend. Paid hours are $0.18/kWh. If 40% of your 1,000 kWh usage happens during free hours, you pay $108 versus $120 on a fixed plan.
Best for: Shift workers, people with EVs who charge overnight, or households that can delay appliance use until free hours.
Downsides: Paid rates are higher than standard fixed rates. Unless 40%+ of your usage happens during free hours, you’ll pay more than a simple fixed-rate plan.
These plans sound great but usually disappoint.
Bill Credit Plans
You get a credit on your bill if your usage falls within a target range.
Example: Rate is $0.13/kWh with a $100 credit if you use 1,000-2,000 kWh. Use 1,500 kWh and your effective rate drops to $0.063/kWh. Use 900 kWh or 2,100 kWh and you get no credit, paying the full $0.13/kWh rate.
Best for: Households with predictable, high usage that consistently falls within the target range.
Downsides: The target range is narrow. Going under or over means you overpay. Rates without the credit are usually uncompetitive.
Bill credit plans are designed to lock in high-usage customers. If your usage varies seasonally, you’ll fall outside the range when you need the credit most.
Tiered or Usage Credit Plans
Your rate changes based on how much electricity you use. Higher usage gets cheaper rates or triggers credits.
Example: First 500 kWh costs $0.14/kWh, next 500 kWh costs $0.11/kWh, anything over 1,000 kWh costs $0.09/kWh. These plans reward high usage.
Best for: High-usage households (2,000+ kWh/month) with electric heat or large square footage.
Downsides: Low-usage customers overpay. Seasonal usage changes can make these plans more expensive overall.
How to Actually Compare Plans
Every plan wants you to focus on the rate. But the rate is only part of the story.
The Electricity Facts Label (EFL) is the standardized document that breaks down every plan’s costs. It shows you the average price per kWh at 500, 1,000, and 2,000 kWh usage levels.
This is the number that matters. Not the advertised rate. The average price per kWh.
Here’s how to compare:
- Pull your last 12 months of electric bills and calculate your average monthly usage
- Go to your state’s comparison website (Texas uses powertochoose.org)
- Enter your ZIP code and usage level
- Look at the average price per kWh at your usage level, not the advertised rate
- Download the EFL for your top 3-5 plans and read the fine print
Most plans are structured to look cheap at 1,000 kWh and expensive everywhere else.
Red Flags to Avoid
High base fees: Low per-kWh rates but $20-30/month just for being connected. Only make sense for very high usage.
Low usage penalties: Plans that charge extra if you don’t use enough electricity. Backwards and predatory.
Teaser rates: Rates that apply only for the first month or two, then jump.
Confusing credits: Credits that require narrow usage ranges, specific timing, or other conditions. If the credit is hard to understand, you probably won’t get it.
Long contracts with high termination fees: Some 24- or 36-month plans charge $200+ to cancel.
The Bottom Line
For most people, a simple fixed-rate plan is the best choice. Pick a competitive rate, sign a 12-month contract, and forget about it.
Gimmicky plans only save money if your usage pattern exactly matches their structure. Free nights work if you can shift 40%+ of your usage to overnight. Bill credits work if your usage never varies. TOU plans work if you never use electricity during peak hours.
The rest of the time, you’re just paying more for complexity.
What to do:
- Calculate your average monthly usage from past bills
- Compare plans at your actual usage level
- Read the Electricity Facts Label for every plan you consider
- Stick with fixed-rate plans unless you have a very specific reason to do otherwise
- Re-shop every year when your contract ends
Electricity companies are counting on you to pick based on the advertised rate and not read the fine print. Don’t fall for it.