How to Choose the Best Energy Plan

Energy deregulation puts you in control of your electricity spending, but choosing the right plan isn’t always simple. If you’re new to the market, terms like fixed-rate, variable-rate, early termination fees, or renewable energy can raise more questions than answers.

Choose Energy is here to help you understand the essentials in clear, straightforward language. Our electricity purchasing guide helps you confidently compare providers and take advantage of your freedom to choose an energy plan that works for your home or business.

To take full advantage of your freedom to choose an energy plan, it’s important to understand the different types of plans and how their rates are structured.

Fixed-rate plan

Best for: traditional setup, long-term stability

A fixed-rate plan is a good option if you want price stability, predictability, and an energy bill you can budget. These electricity plans charge the same rate per kilowatt-hour (kWh) throughout your entire contract term, though your monthly bill may still fluctuate based on your utility company fees (listed as TDU or TDSP charges on your bill) and changes in your usage.

Pros:

• Predictable energy bills
• Rate stability
• Protection from weather or market fluctuations

Cons:

• High renewal rates
• Early termination fee (ETF) for canceling too soon
• No flexibility

Variable-rate plan

Best for: low seasonal rates, flexibility

With a variable-rate energy plan, your rate is based on the current market value of electricity. Prices often change from month to month as energy demand fluctuates. The upside is you’re not locked into a contract, so there are no penalties for canceling your plan. These plans may carry some risk, but they can be a good option if you need the freedom to switch plans often.

Pros:

• Flexibility to switch plans without penalty
• Short-term solution for unique situations

Cons:

• Rates are often more expensive
• No price stability

Bill credits

Some fixed-rate plans offer bill credits when you fall into a certain usage bucket. For instance, you might get a $100 monthly credit for using more than 1,000 kWh. If your electricity usage is generally the same month to month, consider a plan with a bill credit for that usage tier. However, if your energy usage fluctuates, a simpler rate structure might work better.

Time-of-use pricing

Time-of-use pricing can lower your bill if your energy use lines up with low-demand periods. Your rate is fixed in your contract, but prices change based on the time or day of the week. Some plans offer discounted or free electricity during late-night or weekend hours.

This structure works best for households that use most of their energy during the discounted windows. Review your typical usage patterns to ensure the plan fits your routine.

Another important part of your plan is your payment setup. This determines how you’ll pay for energy.

Prepaid plan

Prepaid plans allow you to pay for your electricity in advance, like a prepaid cell phone plan. Your provider will monitor your usage and let you know if you need to top off your account. If you’re on a budget or want to closely monitor your energy usage, this might be the best energy plan for you. You won’t need to pass a credit check or pay an upfront deposit like most other plans.

Postpaid plan

A postpaid plan is the typical setup for most energy customers. Electricity companies typically require a soft credit check to determine whether you’ll have to pay a deposit before beginning energy service. Your provider bills you at the end of each month for your energy usage. The deposit is a downside, but you’ll typically get it back after at least 12 months of on-time payments.

Contract lengths

Contract length is another key factor to consider when deciding which energy plan is best for you. Most providers offer a variety of term lengths, some of which have ETFs.

Month-to-month

Best for: short-term renters

Month-to-month contracts are typically only available for variable-rate plans. Going month-to-month allows you the freedom to switch plans anytime, but you’ll get very little stability in return. If you don’t like the uncertainty of fluctuating monthly rates, this is not the plan type for you.

Three- to six-month

Best for: short-term renters

Three- to six-month plans offer flexibility, making them a good fit for renters or customers in a pinch. These short-term plans can help you take advantage of seasonal rate dips, but they require close attention. If you don’t renew on time, you may be rolled into a higher-priced plan.

12-month

Best for: renters

A 12-month plan offers a balance between flexibility and convenience. It locks in your rate for a full year, so you don’t need to shop often. However, it still gives you an exit point if you expect to move or reassess your options soon. You can switch plans at the end of the term without paying an early termination fee.

24- to 36-month

Best for: homeowners and long-term renters

Long-term 24- to 36-month plans offer fixed-rate pricing and maximum stability, making them ideal for homeowners or long-term renters. While ETFs apply if you cancel early, your rate won’t change with market fluctuations. These plans work well if you want predictable bills and minimal plan management.

The renewable energy market has come a long way over the past few decades, and many of today’s energy providers offer green electricity plans to their customers. Read your Electricity Facts Label (EFL) to find out where your renewable power comes from and how much is included in your plan. If you’re ready to shop for green energy plans today, enter your ZIP code on this page to explore the best options near you.

100% renewable energy plans

This is the most straightforward green electricity option for reducing your carbon footprint. These eco-friendly plans power your home with energy from renewable sources, usually wind energy or solar power.

Renewable energy credits (RECs)

Most providers offset your electricity usage on a green energy plan with renewable energy credits (RECs) from renewable sources equal to your consumption. If you can’t install solar panels or other systems at home, RECs still let you support renewable energy.

Buyback programs

If your home has solar panels, you may be able to sell excess energy back to your provider to lower your bill by enrolling in a solar buyback plan. Credits can offset costs during higher-usage months.