Texas Electricity Rate Types
Texas Electricity Glossary
Texas electricity plans use a variety of rate structures — from simple flat rates to time-of-use pricing, bill credits, and indexed wholesale rates. Understanding how a plan's rate is structured is essential for calculating your true monthly cost at your actual usage pattern. The same stated rate can produce very different bills depending on when and how much electricity you use.
See also: Effective Rate · EFL · Fixed-Rate Plan · Variable-Rate Plan · Bill Credit
- Time-of-Use (TOU) Rate
- A rate structure that charges different per-kWh prices depending on the time of day electricity is consumed. Peak periods (typically weekday afternoons) carry higher rates; off-peak hours (nights, weekends) are cheaper. Texas TOU plans require a smart meter and are growing as REPs seek to shift load away from high-cost grid periods.
- Flat Rate
- A single per-kWh energy rate that applies to all usage regardless of time of day, total usage level, or season. Flat rates are the simplest to understand and budget for. Most standard Texas fixed-rate plans use a flat energy rate combined with a separate TDU delivery charge.
- Tiered Rate (Block Rate)
- A rate structure where the per-kWh price changes based on how much electricity you have consumed in the billing period. Common in some states but rare in deregulated Texas — most Texas plans use flat rates or bill credits instead of traditional tiered pricing.
- Free Nights Rate
- A time-of-use plan where electricity during defined overnight hours (typically 9 PM–6 AM or similar) is charged at $0/kWh or a heavily discounted rate, while daytime hours carry a higher rate. Best for households that can shift major appliance usage — EV charging, laundry, dishwasher — to overnight. Requires a smart meter.
- Free Weekends Rate
- A time-of-use plan where electricity used on Saturday and Sunday (or Friday evening through Sunday) is free or deeply discounted. Weekday rates are higher than a standard flat-rate plan to compensate. Works best for households with high weekend usage patterns. Requires a smart meter for interval billing.
- Seasonal Rate
- A rate structure that charges different per-kWh prices in summer versus winter (or other seasonal blocks). Seasonal rates reflect the higher cost of generation during peak summer cooling months in Texas. Less common as a standalone structure — more often embedded in indexed or variable-rate plans.
- Indexed Rate
- A per-kWh rate tied to a published market index — typically the ERCOT real-time or day-ahead wholesale price, or natural gas futures. Your rate floats with wholesale market conditions, which can be extremely low in normal months but spike dramatically during cold snaps or heat waves. High risk, high potential reward.
- Fixed Rate
- A per-kWh energy rate locked in for the contract term (typically 6–24 months). The rate does not change regardless of market conditions, weather, or grid stress. Texas fixed-rate plans are the most popular plan type for budget stability. Note: the TDU delivery charge is not fixed — it can change with PUCT-approved rate cases.
- Variable Rate
- A per-kWh rate that the REP can change from month to month, typically with 30 days notice. Variable rates often start low to attract customers but can increase significantly. There is no regulatory cap on how high a variable rate can go. Customers on variable rates should monitor their monthly rate and switch if it rises substantially.
- Bill Credit Rate
- A rate structure where the per-kWh price is higher than average but the plan applies a fixed dollar credit (e.g., $50) to bills when usage exceeds a threshold (e.g., 1,000 kWh/month). Effective rate for qualifying months is low; rate for low-usage months is high. Heavily marketed in Texas — always calculate the effective rate at your actual usage level.
- Prepaid Rate
- A pay-as-you-go pricing structure where customers purchase electricity in advance, with balance deducted daily based on actual smart meter reads. Prepaid plans typically carry higher per-kWh rates than postpaid plans but eliminate deposits and contracts. Rate transparency varies — check the EFL for the per-kWh rate before enrolling.
- Demand Rate
- A rate component based on peak power draw (measured in kilowatts, kW) rather than total energy consumed (kWh). Demand rates are standard in commercial electricity billing; rare in Texas residential plans. As smart meters enable 15-minute interval data, some REPs are introducing demand components to residential plans for high-usage households.
- Renewable / Green Rate
- A plan rate that includes the purchase of Renewable Energy Certificates (RECs) to offset the customer's consumption with an equivalent amount of renewable generation. In Texas, green rates are often priced similarly to conventional plans due to the abundance of wind-generated RECs. The per-kWh rate structure (flat, TOU, etc.) applies separately from the renewable designation.
- Average Billing Rate
- Not a price structure but a billing option: your monthly payment is set to an estimated average of your annual usage, smoothing seasonal highs and lows. A true-up at year-end adjusts for the difference between actual and estimated costs. The underlying plan rate (fixed, variable, etc.) remains the same — only the payment schedule is averaged.
See your true total cost: TexasPowerCost.com calculates the full monthly bill — energy + TDU delivery — for every plan in your ZIP at your actual usage. Compare plans.