How To Choose An Electricity Plan

How To Choose An Electricity Plan

August 22, 2023
by
Shawn Cornett

Did you know that Texas has more than 130 retail electricity providers? With so many companies, choosing electrical plans feels overwhelming, as there's a great deal to explore.

How can you make sure you have the best deal without switching to another company? If you're struggling to figure out how to choose an electricity plan in Texas, we're here to help.

Read on to learn more about what sorts of plans are available and how to choose. We'll also look at how energy rates and electrical plans are priced.

Texas Energy

To begin, it's important to understand Texas's energy grid.

Most of the United States is on two separate grids. For the eastern and mid-eastern states, the Eastern Interconnection (SERC) operates east of the Rocky Mountains. From the Pacific to the Rocky Mountain states, we have the Western Interconnection (WECC).

Some central states north of Texas are on the MRO. Along with the WECC, this grid expands into Canada.

Texas, however, is on its own power grid. The Texas Interconnected System separates Texas from both the SERC and the WECC. But why?

By staying in its own grid, Texas's grid does not connect to any other state or power companies. In doing so, Texas ensures that their state can avoid federal laws that dictate power usage.

The result is that Texan power companies are able better to control the price and rates of electricity plans. Most companies are under the umbrella of the Electric Reliability Council of Texas (ERCOT).

However, a negative result is that Texas's energy independence makes it difficult for neighboring states to aid them. During an energy crisis, neighboring states struggle to connect to ERCOT's power grids.

Texas is susceptible to intense energy crises due to this. Most recently, this worsened the 2021 Texas power crisis as power sources struggled in the winter. Similar problems occurred in 2011, as well as several times over the previous decades.

Deregulation

Additionally, Texas has a deregulated electricity market.

In most states, energy providers and utility companies are the same company. Those that deliver your energy also charge you for that energy generation.

In a deregulated market, energy providers purchase electricity from local utility companies. Afterward, they set their own pricing structure and sell it to customers.

Texas generates a decent amount of its energy through renewable sources, including 23% wind, 2% solar, and 11% nuclear. Many believe that this renewable energy makes them susceptible to storms. However, the remaining 64% is fossil fuels, which is more than adequate for power generation.

Some Texas electrical plans give options such as green energy plans. These plans let Texans choose renewable energy sources as their main source of energy. Another popular option is to always default to the cheapest option for energy.

In short, Texas is on its own energy grid, separate from the United States. The separation allows many companies to generate and distribute electricity, which can make it difficult to choose your electrical plans.

How Are Energy Rates Considered?

Now that we better understand Texas's energy grid, how does the state decide energy rates? Here are some of the most important factors deciding the cost of your service.

Service Area

The first to consider is the service area of your company. Texas is one of the largest states, making it difficult for a retail electricity provider to offer services state-wide.

As such, you're often at the mercy of what electricity providers are local. Consider looking into the cost of electricity in an area before you move there.

Cost Per Kilowatt Hour

One of the main things to look for in your electrical plans is the Cost per Kilowatt Hour or kWh. Electricity is measured in kWh, making this a common term. Your provider will use this to share their rates.

Additional Costs and Fees

Energy providers often add on fees and additional costs when making a plan. These may include the cost of operation, service fees, different plans they'll allow, and more.

Ensure that you carefully read these costs when you look into your Texan plan. These fees are often tied to a contract, which can lock you into a decision for months or years.

To get started with your plan exploration, we recommend looking through our rates. We'll help you find the competitive rate that can get you the best price.

Reputation

Finally, the reputation of a retailer will affect the price. As with other goods, the reputation or notoriety of a company will increase (or, in some cases, decrease) the cost.

A more reputable and well-known company will almost always cost more. A smaller company may have lower rates as they work to build a base of customers.

As such, it's critical to learn as much as you can about the electricity plans around you. If you end up paying more for worse service due to a company's name being recognizable, you'll regret it until the end of your contract. Go for the best and most reliable option instead of the most well-known.

Types of Rates

A third factor to consider is what type of rate you'll look for. Electrical plans don't all come in the same form or cost. The best energy plans are ones that offer the pay structure you need.

Here are the three main sorts of rates to find in Texas energy plans.

Fixed Rates

Fixed-rate plans have the same rate throughout your plan. Your highest usage month will cost the same as your lowest month.

If you live in your home full-time, these rates are great for their predictability. High-usage homes can get the most out of these rates. However, if you spend months of the year with the home vacant, you're paying for energy you never use.

There's often a consequence for canceling the contract before the agreed term, typically financial. You can often get a lower kWh rate by selecting a longer-term contract. Do your best to research carefully so you aren't locked into a bad contract.

Variable Rates

A variable rate means that your kWh price will shift according to market price variations. Your retail electricity provider can also change the rate at will.

Due to this volatility, your kWh price can increase or decrease unpredictably. Typically, plans and prices are determined by supply and demand. These factors make your bill more expensive during the summer but often less expensive during the winter.

Variable rate contracts also allow you to switch your provider at any time. Keeping track of the best electricity rates throughout the year can help you make smart changes.

At Ambit, our variable rates are a great way to ensure flexibility at a good cost. We can help when you need month-to-month flexibility, such as while moving or fixing up a property. Should you require a more "stable" option, our fixed rates are ideal.

Market Rates

Similar to variable rates are market rates. However, the variation comes from a predetermined formula rather than the discretion of the provider.

When the market prices drop, providers using market rate contracts must reduce their prices. Variable rates don't need to follow this obligation.

Market rate contracts also have a minimum term similar to a fixed-rate contract. As a result, you can expect penalties if you cancel early. See how we can aid you with these cancelation fees to get out of your nasty contract.

Market rate contracts are beneficial if electricity prices are decreasing. However, natural gas prices tend to keep market rates in Texas high.

How to Choose an Electricity Plan

Now that we've looked into plans and energy generation, do you know how to choose an electric plan? Here are the three main factors you should consider.

Gauge Usage

Your first step is to gauge how much power you use. Doing so can help you see whether you need a fixed or variable plan.

If your usage is high, it's best to go for a fixed plan. Fixed plans allow you to pay the same price no matter how high (or low) your usage is.

If your usage is low, a variable plan might work better. These are ideal for homes you aren't constantly using. If you live in a home full-time, a variable plan will rarely be better than one of our fixed-rate plans.

Decide Your Budget

Next, decide what budget you can allocate to your energy bills.

Picking a bill that's outside of your budget can end in not being able to make the monthly payments of a fixed-rate bill. Market rates are constantly shifting, but the spikes can damage your plans.

Always factor in some level of cushion for the volatility of market or variable plans.

Research Your Options

Finally, research your options with your needs in mind. With so many retailers, you're bound to find something perfect.

To begin your search, we recommend looking through our fixed and variable options. The Lone Star Classic is ideal if you want a simple fixed rate. Our Lone Star Flex plan has no early termination fees, month-to-month contracts, and low monthly fees.

Managing Your Electrical Plans

Managing your electrical plans can feel overwhelming, but with a bit of planning, you can overcome the difficult parts. Always research the plans in your area so you know what sort of companies you'll work with. Decide what best fits your budget and whether you prefer flexibility or stability.

If you're considering switching your plan, you can request a quote today. You can also see where we service so you know whether we can provide you with an excellent plan.

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