Discover the Lowest Electricity Rates in Texas

Electric companies will promote many different plans for “cheap electricity” and other incentives to lure in residential and commercial customers. Reading the fine print or the electricity facts label of your new plan will likely reveal that the rate is actually higher than you realize. At 5 Digital Energy, we find that the best electricity rates are the ones that don’t come with any gimmicks.

Fixed-rate plans

This energy offer is exactly what it sounds like: a rate that is fixed for the duration of the contract. With this kind of agreement the rate on your contract will remain the same for the duration of the contract term. Electricity rates change every day with the market conditions. But when signing a fixed-rate plan, you are locking that rate for the term of the agreement.

Even for fully fixed-rate plans, there can be some confusion and even deceptive practices. Since all electric suppliers are buying electricity in the same wholesale market, we would expect their energy offers to be similar. If you see an energy plan that is considerably lower than the competition, make sure you read the fine print. The lowest energy rate does not always equal the lowest energy bill. For example, that supplier could be passing through certain components, like hub-to-load-zone congestion costs to your electricity bill.

For residential electricity rates, you will see an accompanying document called an Electricity Facts Label or EFL. This document is used to standardize offers so the consumer can see how those passed-through components may add up to the energy rate. EFLs have to make assumptions on your energy usage in order to estimate those rates, so take them with a grain of salt. Not all commercial plans have this document, so it’s important to read contracts thoroughly.

Variable-Rate Plans

With a variable-rate plan, the rates billed by a supplier will change each month as market conditions change or at their discretion. The cheapest electricity rates occur when demand on the electricity grid is low. This is often in the middle of the night, or during the spring and fall when electricity demand for heating and cooling is not high. This is why some suppliers offer “Free Nights” in exchange for a higher rate during the day. In these instances, the less expensive electricity used during off-peak, evening hours is more than offset by more expensive on-peak hours when there is a higher demand for that electricity.

An index or market-based product can sometimes yield the lowest electricity bills, but they can also be the cause of highly volatile electricity bills. Clients who were on an index-based contract during Winter Storm Uri, that hit Texas in February 2021, were hit with energy bills up to 50 times higher than their normal invoices. These expenses caused many suppliers and businesses across the state into bankruptcy. There are now regulations in place to prevent small business and residential electricity customers from inadvertently entering into these variable-rate supply agreements. Conversely, for larger clients who can tolerate large swings in monthly energy bills, an index product may make sense.

Green energy plans

A renewable energy product typically has the same structure as a fixed-rate plan, with one exception. In this case, the power being purchased from the supplier comes from a renewable source, likely wind or solar energy. If you’re interested in 100% green energy, be sure to check the box on the rates screen to show supplier energy offers that come from 100% renewable sources. Green energy plans are becoming more common and more affordable and are a great option if you’re looking to lower the carbon footprint of your home or business!