When Texans search for “electricity contracts,” they often wonder which is better: short-term or long-term. The right contract can protect you from price swings or lock in value when rates drop. This article breaks down what these types of contracts mean, how to choose based on your usage and risk tolerance, and how to spot hidden costs. It’s an evergreen guide you can refer to as you shop for electricity.
Browse electricity plans.
In Texas, a short-term contract usually refers to an agreement of 3 to 12 months. These plans give flexibility and let you adjust to market conditions more often.
A long-term contract often means 24, 36 months or more. These plans offer stability and protection from rising rates, but with the tradeoff of being locked in for longer.
Understanding the difference is key when you compare “electricity contracts” side by side.
Feature | Short-Term Contracts | Long-Term Contracts |
Flexibility | You can switch more frequently; you’re not locked in long | Less flexibility; harder to switch early |
Response to Market | You may benefit if rates fall | You are shielded from rate hikes |
Risk of Spikes | Greater exposure if rates rise suddenly | More protection from rapid increases |
Promotional Advantage | Providers often use promotions to attract short-term customers | Promotions may be smaller or different in long-term deals |
Early Termination Fees | May be moderate | Often higher, especially early in contract |
Fit for Usage Patterns | Ideal for smaller households or uncertain usage | Better when usage is consistent and predictable |
Here are situations where you may prefer shorter terms:
You expect to move or your usage might change soon
You want to take advantage of falling market rates
You dislike being locked in
You have unpredictable energy needs
Short-term plans let you shift more often and respond to lower prices quickly.
Long-term contracts shine when:
You want budget certainty and predictable rates
You live in a stable location with consistent usage patterns
You prefer to avoid the hassle of switching often
You want protection from sudden rate spikes
If rates rise significantly, a long-term plan can save you money compared to switching under pressure.
When shopping, look beyond the cents-per-kWh. A good evaluation includes:
Average Price by Usage Levels
Many Electric Facts Labels (EFLs) show rates at 500, 1,000, and 2,000 kWh usage. Compare the level that matches your home.
Contract Term and Renewal Terms
Does the plan auto-renew? How far in advance must you cancel?
Early Termination Fees or Penalties
Find how much it costs to exit early. Long-term plans often have higher penalties.
Hidden Fees and Extra Costs
Check billing, paper billing, or other administrative fees. These can erode savings.
Usage Profile Compatibility
If much of your energy is used during off-peak hours, a plan structured for that may suit you better than a flat-rate plan.
Provider Reputation and Stability
A low rate is only worth it if the provider is reliable. Check credit ratings, customer reviews, and financial history.
Use recent 12‑month usage history to estimate your typical usage
Avoid the “lowest advertised rate” without reading the fine print
If usage holds steady, long-term can be safer
If your usage or address may change, short-term keeps flexibility
Consider hybrid strategies: start with short-term and shift to a long-term when the market is favorable
Typically 3 to 12 months. These give flexibility to switch plans more often.
Often 24 or 36 months. Sometimes up to 48, depending on the provider.
Yes, but expect fees or penalties. The earlier you cancel, the higher the cost often is.
Look at average price at your usage level, and check all fees and penalties before deciding.
Yes. Contracts built for off-peak or balanced usage may outperform flat-rate plans depending on your habits.
