This is a plan-shopping guide for Texas households and small businesses in the deregulated ERCOT market. It is not financial advice, and it is not an income or business opportunity. All rate figures are illustrative and as of July 28, 2026. Plan details, availability, EFL, and Terms of Service vary by provider and ZIP code, and every enrollment is subject to credit approval.
TL;DR: A June 2026 Retail Energy Revealed report found Texas residential retail-choice customers overpaid about $4 billion in 2024 (roughly $480 per household) versus regulated default service. The cause is plan design, not usage. Five recurring tricks account for most of the gap: teaser rates, bill-credit thresholds, tiered pricing, silent auto-renewal to variable, and opaque free-nights plans. Six numbers on every Electricity Facts Label (EFL) catch every one of them: the average price at 500, 1000, and 2000 kWh, base charge, TDU delivery charges, and any minimum-usage fee or bill credit. This guide, using the Rule of 5-and-6 framework, walks through each trick and how to spot it before you sign.
A new report is putting a dollar figure on something Texas power shoppers have suspected for years: retail electricity plans are engineered to look cheap on the shelf and quietly cost more once the meter starts running.
The June 8, 2026 Retail Energy Revealed report found that Texas residential retail-choice customers paid about $4 billion more in 2024 than regulated default service would have cost, and more than $48 billion extra since deregulation began in the early 2000s. That works out to roughly $480 a year for a typical household. The findings were amplified on July 21, 2026 by the Dallas Morning News, Texas Standard, and a Forbes column by University of Houston energy economist Ed Hirs, all pointing at the same culprit: plan design, not usage.
At Ambit, we have been selling straightforward retail electricity in Texas since 2006, so this is our lane. Here is the Rule of 5-and-6 framework: the 5 plan tricks that drive most of the overpayment, and the 6 numbers on the Electricity Facts Label (EFL) that catch every one of them.
The Retail Energy Revealed analysis, first reported by EnergyChoiceMatters on June 8, 2026, compared what residential retail-choice customers across the country actually paid to what regulated default service would have cost over the same years. Texas, the largest deregulated market in the United States, contributed the biggest slice of the $4 billion 2024 gap.
Ed Hirs, writing in Forbes on July 8, 2026, framed the same numbers as an ongoing consumer-protection problem: providers compete hard for you during a short promotional window, then monetize the relationship through renewal terms, credits tied to a narrow usage band, and rate structures that are hard to compare on a single dollar figure.
None of this is illegal. All of it is disclosed on the plan's Electricity Facts Label. But the tricks work because the average Texas shopper reads the marketing headline, not the EFL.
The rate you see on the ad is the rate for the first billing cycle or the first few months. After the promo ends, the price steps up, sometimes materially.
QuickElectricity and the Dallas Morning News both flag this as the single most common plan-design tactic in Texas. A plan advertised at 10.9 cents per kWh may be a 12-month contract that averages closer to 14 cents per kWh once the introductory period ends.
How to catch it: open the EFL. The "Average Price per kWh" figures at 500, 1000, and 2000 kWh are the contract-length averages, not the promo price. If those three numbers are noticeably higher than the marketing headline, you are looking at a teaser.
This is the most expensive trap of the five. The plan gives you a fixed dollar bill credit only if your monthly usage falls inside a narrow window, often 1000 to 2000 kWh. Use 999 kWh in a mild April, and the credit disappears. ElectricRates and Texas Electricity Ratings both note this can effectively double your rate in months where you miss the threshold.
Bill-credit plans reward one usage pattern and punish every other one. A family that goes on vacation for a week, a small business that closes for a holiday, or a household running efficient appliances all get penalized.
How to catch it: the EFL will list a "Minimum Usage Fee" or a bill credit line under "Other Key Terms and Questions." If either exists, calculate your effective rate at 500 kWh (a light month) and 750 kWh (a shoulder month), not just at the sweet spot.
Similar to bill credits, but structured as different per-kWh rates at different usage bands. The plan quotes 9 cents per kWh at 1000 kWh, then 13 cents at 500 kWh and 11 cents at 2000 kWh. Looks attractive at exactly one benchmark, expensive everywhere else.
ElectricRates recommends always calculating your effective rate at your own historical monthly usage rather than at the benchmark the plan is designed around.
How to catch it: if the three "Average Price per kWh" numbers on the EFL vary by more than 1.5 cents across the 500, 1000, and 2000 kWh columns, the plan has tiered pricing. Pick the column closest to your actual bill.
Your fixed-rate contract ends. If you do not re-shop, most providers roll you onto a month-to-month variable plan at a materially higher price. The Dallas Morning News notes this as one of the main levers behind the $480 annual overpayment figure, because plenty of Texans forget the renewal date and stay on the variable rate for months.
Variable rates are legitimate in the right context (Ambit's own Lone Star Flex is a no-contract month-to-month plan for people who want that flexibility), but a variable-rate auto-renewal from a contract you thought was fixed is usually the most expensive rate the provider offers.
How to catch it: the EFL and the Terms of Service both disclose renewal treatment. Look for "Renewal Type" on the Terms of Service. If it says the plan renews to a "month-to-month variable rate," calendar the contract end date now and plan to re-shop 30 days before it hits.
Time-of-use plans that give away a chunk of hours (nights, weekends, sometimes both) are excellent for the right household and expensive for the wrong one. The catch is that the on-peak rate that funds the free window is often 3 to 5 cents per kWh above a comparable fixed plan.
ElectricRates puts a rule of thumb on it: unless more than about 30 to 40 percent of your usage falls inside the free window, a straight fixed-rate plan is cheaper. A household that runs the dishwasher and laundry after 8 PM, charges an electric vehicle overnight, or runs a pool pump on a night schedule can win. A household that mostly cools an empty house during the day and cooks dinner at 6 PM usually loses.
Ambit's Free and Clear Nights is a genuine option in this category with published on-peak and off-peak windows, but even a good time-of-use plan is the wrong tool if your usage does not fit the window.
How to catch it: the EFL will show two "Energy Charge" lines instead of one, one for the free window and one for the paid window. Multiply your actual on-peak kWh (roughly 60 to 70 percent of usage for most Texas households) by the paid rate to see what you would really pay.
Every Texas retail electricity plan is required to publish an Electricity Facts Label. You can find it on Power to Choose or on the provider's own site. Six numbers on that label neutralize all 5 tricks:
| # | Number on the EFL | Where to find it | What it catches |
|---|---|---|---|
| 1 | Average Price per kWh at 500 kWh | Top of EFL, pricing box | Teaser rates, tiered pricing |
| 2 | Average Price per kWh at 1000 kWh | Top of EFL, pricing box | Baseline for typical household |
| 3 | Average Price per kWh at 2000 kWh | Top of EFL, pricing box | Heavy-usage months, bill-credit collapse |
| 4 | Base Charge | Pricing section, flat monthly fee | Hidden fixed cost that raises low-use bills |
| 5 | TDU Delivery Charges | Pricing section, pass-through wires cost | Confirms Oncor, CenterPoint, AEP, or TNMP is disclosed |
| 6 | Minimum Usage Fee or Bill Credit | Other Key Terms and Questions | Bill-credit thresholds and usage-cliff traps |
If those three "Average Price" numbers are close to each other, the plan is straight per-kWh pricing with no hidden usage cliff. If they vary widely, the plan is a threshold play. That single test filters out four of the five tricks.
We have been selling retail electricity to Texas households and small businesses since 2006, so we have watched every one of these tactics enter and exit the market. Our plans are built to survive the EFL test:
We publish the EFL for every plan, we do not price to a bill-credit threshold, and we send renewal notices in advance so nothing rolls silently to a higher variable rate.
The $480 gap the Retail Energy Revealed report identified is a plan-design problem, not a rate-market problem. Every one of the 5 tricks above is disclosed on the EFL before you sign. Read the label. Calculate at your actual monthly usage, not the benchmark. Calendar your renewal date. Prefer straight per-kWh pricing unless a time-of-use plan genuinely fits your household.
If you would like someone to review a Lone Star Classic quote for your ZIP code, we can gladly assist you with that as well. You can request a quote and we will retrieve your EFL to compare.
What is an Electricity Facts Label (EFL)?
This is one page document provided by Texas retail electricity providers for each plan. It includes the average price for 500, 1000, and 2000 kWh, the base charge, TDU delivery pass-through, length of the contract, renewal treatment, percentage of renewable energy, and the minimum usage fee or a bill credit. It is available for each plan on the provider's site or on Power to Choose.
What is a bill-credit threshold, and why is it a trap?
A bill-credit plan provides a fixed dollar amount as a credit only when your monthly usage falls within a specified range (typically, 1000 to 2000 kWh). If your usage is lower than that range, you will lose the credit. This means your rates may double during that month. Texas Electricity Ratings and ElectricRates have both cited this as the most costly tactic when designing electricity plans for Texas.
When does a free nights or free weekends plan actually make sense?
As a rule of thumb, you usually need more than 30 to 40 percent of your monthly usage to be free in order for a time-of-use plan to offer better value than a straight, fixed-rate plan of equivalent quality. Households doing dishwashing, laundry, EV charging, or pool pumping at night stand to benefit; those who predominantly cool an unoccupied house during the day do not.
How often should I re-shop my electricity plan?
Mark your contract end date on the calendar, and aim to re-shop around 30 days ahead of it. Most fixed-rate contracts in Texas auto-renew to a month-to-month variance which tends to be the highest price offered by the provider. The Dallas Morning News cites auto-renewal as a key contributor to the $480 annual overpayment.
Which TDU serves my ZIP code?
Texas is served by four regulated TDUs (Transmission and Distribution Utilities). For the majority of the DFW metroplex, it is Oncor. For Houston and the coastal areas around it, it is CenterPoint. AEP Texas serves the Rio Grande Valley, South Texas, and around Corpus Christi, while TNMP serves a mix of North, Central, and Gulf Coast areas. The TDU is a fixed pass-through charge listed on every EFL, and is the same across providers within your ZIP code.
Is the $480 overpayment figure applicable to my home?
This figure represents an average in the Texas market, so your actual gap may vary based on your current plan, usage pattern, and how long you have been on your current contract. A household that is stuck on a variable rate after an unnoticed auto-renewal will be well above the average. A household that reads the EFL and re-shops annually will be well below it.
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