Apartment renters need to know exactly how many months are left on their lease when they decide to switch providers or establish new electricity service.
Electricity rates in Texas are hovering at historic lows, so it makes the most sense to lock in these great rates for the long term. But residential electricity contracts have early termination fees if you end the service early.
For example, say you lock in a great rate for 12 months, but only have 11 months left on your lease. When you move out at the end of your lease, you obviously call your provider to tell them to disconnect the electricity service. Even though you only have one month left on your electricity contract, they are going to hit you with the full early termination fee, which usually runs anywhere from $150-$250.
So there are three strategies you can use to avoid that scenario, two that make sense and one that doesn’t. The strategy that doesn’t work in your favor is getting on a monthly variable rate instead of locking in a low rate. Currently, variable residential rates are running about 35% higher than fixed rates. That means you are paying for four months of electricity every 3 months – that’s a losing proposition.
The second strategy is to lock in a rate for a time frame that is just shorter than your lease term. For example, signing up for 9 month electricity term because you have 10 months remaining on your lease. Then you can switch to a variable rate for the final month.
The last strategy to discuss is choosing a provider that has a pro-rated early termination fee. This is the strategy that we most often advocate. There are providers that will charge you a pro-rated fee based on the remaining months of your contract, which usually runs $20 per remaining month. You have the benefit of locking in the historically low rate, and you have a relatively cheap charge to break the contract early. So if you signed up for a 12-month electricity plan but move out after 11 months, it’s only going to cost you $20 to break the contract instead of $150 that the other providers would charge you. Heck, I’ve seen JustEnergy try to charge a family over $1200 to break their contract early. That is insane!!