Fixed Rate Electricity in Texas: A Guide for Businesses

Fixed rate electricity is the most popular way Texas businesses buy power — and the most misunderstood. Owners sign a "fixed" contract, then open a bill that went up anyway and conclude they were lied to. Usually they weren't. They just weren't told what the word "fixed" actually covers.

This guide explains what a fixed rate electricity plan really locks in, how it compares to variable and indexed alternatives, what the fine print does to your "fixed" price, and the situations where locking in is the wrong move.

What "Fixed Rate" Actually Fixes (and What It Doesn't)

A fixed rate electricity contract locks one thing: the energy charge — the price per kWh your Retail Electricity Provider (REP) charges for the power itself. For the length of your term, that number doesn't move with the market.

What it does not fix:

• TDU delivery charges. Your local utility (Oncor, CenterPoint, AEP, TNMP) charges regulated fees to deliver power over its wires. These pass through on every bill, change when the utility's tariff changes, and are identical no matter which REP you choose. Read more on the difference between your REP and your TDU.
• Taxes and regulatory fees. Sales tax, PUC assessments, and similar charges float by law.
• Your usage. A fixed rate is not a fixed bill. Use 40% more electricity in August and your bill rises 40% — at the same locked rate.

So when a bill goes up under a fixed contract, the cause is almost always usage or a TDU tariff change — not the rate. Knowing how to read your commercial electricity bill makes this easy to verify line by line.

How REPs build a fixed rate

Understanding the quote helps you negotiate it. When a REP prices a fixed rate electricity plan for your business, the number is built from: the wholesale forward price of power for each month of your term (what the market charges to commit today to deliver next August), ancillary services and capacity-related costs ERCOT charges to keep the grid stable, shaping and load-profile risk (a restaurant that peaks at dinner costs more to serve than a 24/7 cold-storage warehouse with flat usage), and the REP's margin.

Two takeaways. First, your usage history is leverage — a clean 12-month usage file from the TDU lets suppliers price your actual load instead of padding the quote for uncertainty. Second, quotes expire fast, sometimes same-day, because the wholesale curve moves underneath them. When a good quote lands, be ready to decide.

Fixed vs. Variable vs. Indexed: Side by Side

The honest summary: variable plans are holdover instruments, not strategies — they're what you land on when a contract expires without a renewal. Indexed plans suit large, sophisticated loads. Fixed rate electricity is the default answer for the overwhelming majority of Texas businesses because a single ERCOT price spike can cost more than years of theoretical variable-rate savings. For the full comparison, see fixed vs. variable rate electricity.

Contract Lengths in Texas: 12, 24, or 36 Months?

Texas REPs quote commercial fixed terms from 6 to 60 months. The three standard choices:

• 12 months — maximum flexibility, but you re-enter the market every year and might renew in a bad one. Often priced higher than longer terms because the REP carries near-term risk.
• 24 months — the workhorse. Balances rate competitiveness with flexibility; skips one renewal cycle.
• 36 months — best when the forward curve is cheap. Locking three years during a soft market is one of the highest-ROI decisions an energy buyer can make; locking three years at a peak is the costliest.

The right term depends less on preference and more on where forward prices sit — which is exactly what a broker watches. Timing guidance lives in our post on when to renew your commercial electricity contract.

One underused tactic: forward-start contracts. You don't have to wait until your current contract ends to lock the next one. If the market is favorable today and your term ends in nine months, you can sign now for a start date nine months out — capturing today's prices and eliminating renewal-timing risk in one move. REPs quote forward starts up to a year or more ahead.

The Fine Print That Changes Your "Fixed" Price

Two clauses determine whether your fixed rate stays fixed in practice:

Bandwidth (swing) clauses

Your contract is priced against your projected usage. A bandwidth clause — commonly "100%" or "± 10/20/25%" — defines how far actual usage can deviate before penalties apply. Outside the band, excess usage may be billed at market rates, and shortfalls may trigger charges for power you didn't use. Growing businesses, seasonal operations, and businesses adding equipment should negotiate the widest bandwidth available.

Early termination fees

Exiting a fixed contract early triggers an ETF: either a flat fee per remaining month or — more dangerous — "liquidated damages" based on remaining contract value. If a sale, relocation, or closure is plausible during the term, get the ETF formula in writing before signing and prefer flat-fee structures.

All-inclusive vs. energy-only: the 15–20% question

Not all "fixed" quotes fix the same components. An all-inclusive fixed rate bundles energy, ancillary services, and ERCOT cost components into one locked number. A fixed energy-only rate locks the energy charge but passes through ancillaries, capacity-related charges, and "change in law" costs at whatever they turn out to be. The two can differ by 15–20% in delivered cost — which means an energy-only quote that looks cheaper than an all-inclusive quote may be more expensive once the pass-throughs land.

When comparing quotes, require every supplier to state, in writing, exactly which components are fixed and which float. This single question eliminates most quote-comparison errors businesses make.

When NOT to Lock In a Fixed Rate

Fixed isn't always right. Hold off when:

1. The market is falling. If forward prices are visibly declining, a short 6–12 month bridge term — or a brief stint on index — can beat locking a long term at today's price.
2. Your occupancy is short. Lease ending in 14 months? Don't sign 36. Match term to tenure, or negotiate an assignment clause.
3. Your usage is unpredictable. Major expansion, new equipment, or a possible second shift can blow through bandwidth. Fix after the load stabilizes, or negotiate wide swing first.
4. You can genuinely tolerate volatility. A few large operations treat power like a traded commodity and hedge price volatility deliberately. If that's not you — and it isn't for most — certainty wins.

And when fixed is clearly right

The mirror image is just as useful. Fix with confidence when energy is a meaningful share of operating cost and a price spike would hurt (restaurants, manufacturers, cold storage); when you budget annually and answer to owners, boards, or franchisors who dislike surprises; when your occupancy horizon comfortably covers the term; and when forward prices sit at or below recent norms. In those conditions the question isn't whether to fix — it's only how long.

How to Get Fixed-Rate Quotes (Without Calling 10 REPs)

You can call providers one at a time and try to normalize ten differently-structured quotes yourself — or have a broker who specializes in commercial electricity in Texas run the process: pull your usage from the TDU, put your load profile out to 25+ competing suppliers, normalize every quote to the same term, start date, and all-in structure, and flag the bandwidth and ETF terms that differ.

Brokers are paid by the supplier, not by you, and competition between REPs for brokered accounts typically nets a lower rate than going direct. The result: one decision, made on comparable numbers. Start with our fixed rate commercial electricity page or request a quote directly.

FAQ

Can my fixed rate change during the contract?

The energy charge can't — that's the lock. But your total bill can still move because TDU delivery charges, taxes, and regulatory fees pass through at cost, and your usage varies month to month. Some contracts also allow pass-through of "change in law" costs; ask before signing.

What happens when my fixed rate contract expires?

If you do nothing, you roll onto a month-to-month holdover rate — usually variable and substantially above market. Mark your end date and start shopping 3–6 months ahead; you can lock a new rate today that starts when the current term ends. Details in what happens when your commercial electricity contract expires.

Is a fixed rate more expensive than a variable rate?

In a calm month, a variable rate can look cheaper. Across a full Texas summer or a winter event, fixed almost always wins for businesses — variable plans pass spikes straight through, and ERCOT spikes are violent. You're paying a small premium for insurance against the exact events most likely to hurt you.

How do I lock in a business electricity rate?

Gather a recent bill (or let a broker pull your usage from the TDU), get quotes normalized to the same term and structure, check bandwidth and ETF clauses, then sign — the rate is locked from the contract's start date, which can be months in the future.

The Bottom Line

Fixed rate electricity gives Texas businesses the one thing the ERCOT market doesn't offer on its own: a predictable cost on the only bill component you can control. Lock the energy charge, understand what passes through, match the term to the market and your tenure, and never let a contract expire into holdover.