Fixed, variable or indexed: business electricity rates in Texas

The rate types at a glance.

The Public Utility Commission of Texas defines each type in Substantive Rule 25.475. What separates them is who or what can move the price once you have signed.

“50 kW” is the line between a small commercial customer and a larger one: a business whose peak demand is under 50 kW in every 12-month period is small commercial (Substantive Rule 25.471(d)(11)). Your peak demand is the kW figure on the bill; our guide to demand charges shows where to find it.

What a fixed rate fixes.

For a business under 50 kW, a fixed rate must stay the same for every billing period of a term of at least three months. The price it fixes includes all recurring charges and ancillary services, but not sales tax or the gross receipts tax reimbursement.

The rule allows it to move for only three reasons:

• actual changes in the delivery (TDU) charges your utility bills, such as Oncor or CenterPoint;
• changes in the ERCOT or Texas Regional Entity administrative fees charged to loads;
• new or changed federal, state or local laws that add a cost the provider cannot control.

A provider does not have to warn you before passing one of those through, but each bill must show the change on its own line or carry a notice that the amount may include changes allowed by law (25.475(d)(2)). Using the word “fixed” for a plan that does not meet this definition is prohibited (25.475(c)(1)(A)).

A fixed rate fixes the price per kWh, not the bill. Usage, peak demand and the utility’s own charges still move the total; our guide to reading a business electricity bill separates the parts.

How a variable rate changes.

A variable price changes by a method the provider sets, which can include a cap on how much it may rise from one month to the next. For a business under 50 kW, the provider needs no advance notice to change it, as long as the change follows the plan’s Electricity Facts Label, and it must give the current price on its website and through a toll-free number.

The label of an uncapped variable plan must say, in bold, that the price shown applies to your first billing cycle and may change in later months at the provider’s discretion. A capped plan states the largest monthly increase instead.

A month-to-month plan cannot carry a termination fee. A variable plan with a longer term can be offered to a small business, and the rules do not ban a fee on it, so read the early termination line before signing. When a fixed contract ends and no new one is in place, a small business moves onto the provider’s month-to-month default product, which is variable; our contract renewal guide covers the notice and the 14-day window.

Indexed and pass-through plans above 50 kW.

Indexed products have been banned for residential and small commercial customers since February 1, 2022, and wholesale indexed products since September 1, 2021 (25.475(c)(3)(F); Utilities Code 39.110). So a Texas offer described as indexed, or as passing through market prices, is only for a site at 50 kW or more.

Above that line, Rule 25.475 does not apply. A larger customer may agree in writing to more or less protection than the rules give small businesses (25.471(a)(3)), so what “fixed” covers is whatever the contract says. One safeguard remains: before enrolling a larger customer in a wholesale indexed plan, or in any plan that bills ancillary service charges separately, the provider must get a signed acknowledgement of risk (25.499(d)). Its required wording warns that a separate ancillary services charge “may cause my energy bill to be multiple times higher in a month in which ancillary services charges are high.”

Before comparing a larger site’s offers, ask each supplier the same questions:

• Is the price all-in, or are some charges billed separately? Which ones?
• Do delivery charges pass through at cost, or are they inside the price?
• Are ancillary services, ERCOT fees or congestion charges included?
• If any part is indexed, which index, and how often is it reset?
• What happens at the end of the term if nothing new is signed?

An offer that leaves charges out of its headline price can look cheaper than an all-in price that includes them. Line them up on the same basis with our quote comparison checklist.

Read the Electricity Facts Label.

For a business under 50 kW, every plan comes with an Electricity Facts Label, printable on no more than two pages, given at enrollment and on request (25.475(c) and (g)). It must state:

• whether the plan is a fixed rate or a variable price product;
• the average price in cents per kWh at 1,500, 2,500 and 3,500 kWh a month, assuming a 30% load factor where demand charges apply;
• the length of the term, any minimum term, and any early termination fee;
• every fee the provider may charge, and whether it is included in the price.

The average prices are calculated at those three usage levels, not yours. If your monthly kWh or your load factor is far from them, the label’s average is a guide to the plan, not to your bill.

Choosing between them.

A fixed rate trades flexibility for a known supply price: you can budget the term, and leaving early usually costs a fee. A variable rate is easier to leave but can change every billing cycle. An indexed plan follows the market, which can suit a larger site that can carry price movement or manage its usage around it.

Timing matters as much as type. A fixed rate can be agreed months before the current contract ends, to start the day it ends, so there is no fee to break it and no stretch on a month-to-month price in between. Whatever you are offered, ask what can change the price after you sign, and get the answer in the contract.

Want offers on the same basis? Start with your business ZIP and email, and add every page of a recent bill when you have it.