electricity contract agreement

Pass the Pen: Understanding Electricity Contracts in Texas

In Texas, electricity is deregulated which means that there are a variety of retail electric providers (REPs) to choose from. 

When you sign up for electricity service with a REP, you enter into a contract agreeing to pay a certain rate for your energy consumption. 

But what does that contract actually mean? And what happens if you want to switch REPs? 

Here’s a look at the basics of electricity contracts in Texas.

Key Takeaways

  • Choosing a new electric company can be stressful, especially if you think you might have to pay a higher rate or don’t understand your contract. 
  • In Texas, you have free energy choice, meaning you can change your electricity companies at will.
  • However, you still need to understand various elements of your contract, such as your electricity consumption, the terms of service, and your rights as a consumer. 

Reading an Electricity Contract

Choosing an electricity provider is a big decision. Not only will you be locked into a contract for a set period of time, but you’ll also be responsible for paying the associated fees. That’s why it’s so important to read your electricity contract carefully before signing on the dotted line.

When you’re ready to sign up for an electricity plan, it’s important to understand the contract you’re agreeing to. Here are a few things you should look for in your electricity contract. 

EFL – Electricity Facts Label 

The Electricity Facts Label (EFL) is a great place to start if you’re trying to decode your bill. The EFL provides key information about the electricity provider, including the price per kilowatt hour, the length of the contract, and any early termination fees. This information can help you compare different providers and make an informed decision about which one is right for you.

Terms of Service 

When you’re signing up for a new electricity plan, it’s important to read and understand the terms of service before agreeing to anything. The terms of service is a document each utility company must give to every Texan that outlines the rules and conditions of your contract, including things like pricing, fees, and penalties. 

It’s important to read and understand the terms of service before signing up for a new plan, because it can help you avoid unexpected charges or fees. If you have any questions about the terms of service, be sure to ask your electricity provider before signing up for a new plan.

Your Rights as a Consumer 

When you sign an electricity contract, you are agreeing to certain terms and conditions set forth by the electricity provider. 

One important section of the contract is Your Rights as a Consumer. This section lays out your rights and responsibilities as a customer. It includes information on billing, payments, disconnection, and other important topics. 

By reading and understanding this section of the contract, you can be sure that you are getting the best possible service from your electricity provider.

Contract Expiration 

Be sure to check the expiration date. This is important because you don’t want to be caught off guard by a surprise price increase. Second, be on the lookout for early termination fees. These can be costly, so it’s best to know about them in advance. 

Finally, take note of the renewal cycle. Does your plan end in summer? If so, then your options for your next contract will likely be priced at a higher rate. By being aware of these things, you can be better prepared when it comes time to renew your contract.

Things to Consider When Shopping for a Plan 

There are a few things to keep in mind when shopping for an electricity plan. First, it’s important to know your energy usage. This can be found on your most recent energy bill. Once you know your energy usage, you can start to compare plans. 


One of the key things to look at when shopping for an electricity plan is the rate. The rate is how much you’ll pay per kilowatt hour (kWh) of electricity that you use. There are three main types of rates: fixed, variable, and market rate (indexed).

A fixed rate is a set price that does not change for the length of your contract. A variable rate can change at any time and is often based on the wholesale price of electricity. Market rates (indexed) are similar to variable rates, but are tied to a specific energy index. As a result, they can fluctuate up or down based on market conditions. 

While each type of rate has its own advantages and disadvantages, shopping around and comparing different offers to find the best deal for your needs.

Length of Contract 

When shopping for an electricity plan, one of the key considerations is the length of the contract. 

Electricity plans can be short-term or long-term, and each has its own benefits and drawbacks. 

Short-term plans are typically less expensive than long-term plans, but they may not offer as much stability. Long-term plans usually provide more stable pricing, but they may be more expensive up front. 

Ultimately, the best plan for you will depend on your specific needs and budget.

Is There a Deposit? 

One thing to keep in mind when shopping for an electricity plan is whether or not the provider requires a deposit.  In some cases, the deposit may be equal to one month’s worth of service, while in other cases it may be a smaller amount. If you are unsure whether or not a provider requires a deposit, it is always best to contact them directly to ask. Other power companies may ask for a credit check, especially in order to offer the best rate in your area, so be sure to ask if you think that might be a problem for you. 

Additionally, it is important to remember that if you do have to pay a deposit, it will likely be refunded to you after a certain period of time as long as you continue to make your payments on time. 

Therefore, even if a provider does require a deposit, it should not be a deterrent from choosing that particular plan.

Is Renewable/Green Energy Something That’s Important to You? 

When it comes to electricity, there are a lot of options to choose from. And, with the growing focus on sustainability and environmental consciousness, more and more people are looking for ways to reduce their carbon footprint. 

For those who are interested in green energy plans, there are a few things to keep in mind when shopping for an electricity plan. 

First, it’s important to find out if the electricity provider offers energy plans like these. Second, it’s worth considering the mix of renewable and traditional energy sources that are used to generate electricity. It’s often solar energy, but it can vary depending on which renewable energy sources are available where you live. 

And finally, it’s helpful to know how much of the total electricity demand is met by renewable energy. You may have to dig deep to find this information, since it’s often in the fine print—and it can be tough to find the best option when you’re searching your local zip code for retail electricity providers near you. 

Ask Questions 

It’s important to be an informed consumer, especially when it comes to your utilities.  After all, your electric service is something you rely on every day. 

That’s why, when you’re looking at your electricity contract, it’s important to ask questions if something is unclear. You don’t want to be surprised by hidden fees or take clauses down the road. And if you’re not sure what something means, it’s always better to get a clarification from the provider rather than taking a guess. 

With a little due diligence, you can be confident that you’re getting the best possible service at a fair price. So don’t be afraid to ask questions when reviewing your electricity contract—it’s the best way to ensure a smooth, hassle-free experience.


If you live in Texas, it’s important to understand the basics of electricity contracts. By considering these tips today, you can be sure that you are set up for success when it comes time to sign a contract with an energy provider.

Questions Others Are Asking 

When is the best time to renew an electricity contract in Texas?

The answer to this question depends on a number of factors, including the current market rate for electricity and the terms of your current contract. In general, it is best to shop around for new electricity rates about two months before your contract expires. This will give you plenty of time to compare rates and find the best deal. However, if you are happy with your current provider and rate, you can often renew your contract without shopping around. Just be sure to check the terms of your contract to see if there are any penalties for early termination.

Are variable rates risky? 

Variable-rate plans can be more volatile, so if you need predictability in your monthly budgeting, a fixed-rate plan may be a better choice. On the other hand, if you’re willing to take on a little more risk in exchange for the potential for lower rates, a variable-rate plan could save you money in the long run.

Will I be charged an early termination fee if I move? 

Many electricity plans in Texas include an early termination fee that is charged if you cancel your service before the end of your contract. In some cases, this fee can be as high as $200. If you are planning to move, it is important to check with your electricity provider to see if they will charge an early termination fee. Some providers will waive the fee if you move to a location that is served by the same company. Others may charge a prorated fee based on how many months are left on your contract. Still, others may require you to pay the full amount of the early termination fee.

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