How do electricity contract lengths work in Texas?
Contract length tells you how long an electricity agreement lasts. It does not tell you whether the plan is inexpensive or well suited to your usage.
On a fixed-rate plan, the term is the period when the plan's recurring price terms remain fixed, except for limited changes allowed by the contract and Texas rules. A 12-month and a 24-month fixed plan follow the same basic rule; the 24-month plan applies it for another year.
There is no contract length that is always better. Compare the price formula at your usage first. Then compare how long each formula lasts, when each contract expires, and what it would cost to leave early at the same address.
What changes when the contract term is longer?
A longer fixed term extends two things:
- The fixed-price period: the plan's recurring price terms apply for more billing cycles.
- The contract period: any disclosed early termination fee can apply for longer if you change plans at the same address before expiration.
It also moves the next expiration date farther away. For example, a 12-month contract reaches expiration one year after it begins, while a 24-month contract reaches it two years after it begins.
The term does not fix your total bill. Your bill can still change because your usage changes, utility delivery charges change, taxes or government-assessed fees change, or a credit or time-of-use rule in the fixed formula applies differently that month.
The term also does not determine the price. Providers publish separate offers with separate price formulas, so a longer contract can have a higher, lower, or equal estimated price compared with a shorter one.
Where are the term and early termination fee disclosed?
The Electricity Facts Label, or EFL, identifies the product as fixed or variable and shows the contract term and early termination fee, if any. The Terms of Service explains the contract dates, termination process, and what happens at expiration.
Those documents answer different questions:
- EFL: What is the price formula? How long is the term? Is there an early termination fee, and how much is it?
- Terms of Service: When does the contract begin and end? How does cancellation work? What product follows if no new choice is made?
- Contract-expiration notice: What is the actual expiration date, and what renewal or default terms are being offered?
A residential month-to-month contract works differently from a fixed term. Its price may change between billing cycles, and Texas rules do not allow it to have a termination fee or penalty.
How do you compare a 12- and 24-month offer?
First calculate both offers at the same usage. The difference between those estimates is the known cost difference while both plans are available. The price of a new offer after the 12-month plan expires is unknown.
That uncertainty means a 12-versus-24 comparison cannot prove which path will cost less over two years. It can show the future price at which the two paths would break even.
What the comparison can show
Simplified estimates at the same 1,000 kWh usage
| Choice | Estimated bill | First 12 months | Second 12 months | Two-year total |
|---|---|---|---|---|
| 12-month plan | $150/month | $1,800 | Depends on the next plan | $1,800 + the next plan |
| 24-month plan | $154/month | $1,848 | $1,848 | $3,696 |
12-month plan
- Estimated bill
- $150/month
- First 12 months
- $1,800
- Second 12 months
- Depends on the next plan
- Two-year total
- $1,800 + the next plan
24-month plan
- Estimated bill
- $154/month
- First 12 months
- $1,848
- Second 12 months
- $1,848
- Two-year total
- $3,696
The early termination fee is a separate part of the comparison. If the 24-month contract has a fee and you leave it early at the same address, that charge changes the total cost. The EFL states the fee as a flat amount, a formula such as an amount per remaining month, or no fee.
Does the month a contract ends predict the next price?
No. The end month tells you when the fixed terms expire; it does not determine the price of the offers that will be available then.
Electricity demand and wholesale conditions can be more volatile during extreme summer or winter weather. Retail offers, however, are priced for future service and can reflect fuel costs, expected demand, available generation, and other market conditions. A contract ending in spring or fall is not guaranteed to have a cheaper replacement than one ending in summer or winter.
A 12-month contract generally returns to the same part of the year. A term that is not a multiple of 12 shifts the expiration month. That difference is certain; the price available in the new month is not.
What happens when a fixed contract expires?
Texas providers must send expiration notices before a fixed-rate contract ends. For a contract longer than four months, the final notice must be sent at least 30 days before expiration. The notice states the expiration date and explains the renewal and default options.
If you take no action, the provider continues service on a default month-to-month product. Contract expiration by itself does not shut off power. The default product can be canceled without a termination fee, but its price may change between billing cycles.
The default product is a new set of terms, not an extension of the expired fixed price. Its terms must be disclosed in the contract and expiration notice. The early termination fee guide explains the separate protection for a switch scheduled during the final 14 days of a fixed contract.
Does an electricity contract need to match a lease?
No Texas rule requires the contract and lease to end together. Matching the dates may make them easier to track, but the lease date does not change the electricity plan's price or term.
Texas's relocation rule also limits the early termination risk for a genuine move. When you leave the service address, provide a forwarding address, and provide reasonable evidence of the move if requested, the provider cannot assess an early termination fee because of the relocation. The rule does not cover changing providers while remaining at the same address.
This means the exact lease date is context, not a formula for choosing the electricity term. The EFL's price and fee still apply while you remain at the address.
What should you check before accepting a term?
The plan documents should provide the facts needed to understand the commitment:
- Whether the product is fixed or month to month.
- The full price formula and estimated cost at your low, typical, and high usage.
- The number of months in the contract.
- The early termination fee and how it is calculated.
- The contract's start and expiration dates.
- The default renewal terms if the fixed contract expires without a new selection.
These checks do not require a prediction about future electricity prices. They separate what the contract states today from what cannot be known about the market at expiration.
Electricity contract length FAQ
Is a 12- or 24-month electricity plan better?
Neither term is inherently better. A 24-month fixed plan keeps its price terms for an additional year, while a 12-month plan reaches its next expiration sooner. The useful comparison is the price at the same usage, the early termination fee, and the duration of the terms being offered.
Do longer electricity contracts have lower rates?
Not consistently. Contract length is not a discount formula, and providers price each offer separately. Compare the current EFLs rather than assuming that a longer or shorter term has the lower price.
Is a 36-month electricity contract different from a 12-month contract?
The fixed-rate mechanics are the same. The stated price terms last three years instead of one, the expiration occurs later, and an early termination fee may remain relevant for a longer period. The EFL shows whether the actual price formula and fee differ.
What time of year is best for an electricity contract to end?
No month reliably produces the lowest next offer. Weather and demand affect electricity markets, but retail prices also reflect expectations about the future period being sold. The expiration month identifies when new terms will be needed, not what those terms will cost.
What happens when an electricity contract ends in Texas?
The provider sends expiration notices and, if you take no action, continues service on a default month-to-month product. The fixed price does not necessarily continue, but the default product can be canceled without a termination fee.
Should an electricity contract match an apartment lease?
It does not have to. Texas's relocation rule generally prevents an early termination fee when you move away from the service address and meet the forwarding-address and evidence requirements. A same-address provider change is different and can still trigger the disclosed fee.
Sources and related reading
The PUCT's Power to Choose user guide explains fixed and variable plan types. Texas's contract-disclosure rule, 16 TAC §25.475, defines contract terms and fixed-rate products and covers EFL disclosures, relocation, expiration notices, and default renewal. The U.S. Energy Information Administration's electricity price explainer describes how demand, weather, fuel costs, and available generation affect electricity prices.
Reviewed July 30, 2026. This guide provides general educational information, not legal advice. Rules and plan terms can change; confirm current PUCT materials and your plan documents for your situation.
Continue with how to read an Electricity Facts Label, early termination fees, how to switch electricity providers, or how the deregulated Texas market works.