Do you feel like you are stuck in an electricity plan contract? What should you do if you are in a contract and electric rates go down? What if you find another electricity plan from another provider that’s better? And what if you are moving?
The big question is, “Can I cancel my electricity contract?” The answers depend on your specific situation. Each electric supplier has a unique policy for early termination fees and each state has their own rules about what your supplier can charge in different situations.
The bottom line is that you can still shop for electricity rates and plans even if you are in a long-term contract. So you are never stuck in your electricity plan contract.
Scenario #1: “I Found a Better Electricity Rate But I’m in a Contract”
Electricity rates fluctuate regularly. In most of the U.S., electric rates are highest in the summer and lowest in late winter/early spring. Because summer is a popular time to move, people often find themselves shopping for electricity during the time of year when rates are the highest. When it comes time to renew their contract, they are stuck in a cycle of renewing when rates are the highest.
It’s no surprise that these customers are frustrated when they notice lower rates available during other times of the year.
And, in 2022, electricity prices soared, making long-term contracts the cheapest available rates. Now in 2023, rates are crashing down. That means you may be stuck in an expensive contract and paying too much.
Should I pay an Early Termination Fee and Get Out of My Contract?
So if you are in this scenario, the big question is how to decide if you should pay an early termination fee and get out of your contract. You’ll need to spend a few minutes doing some basic rate comparisons.
Time needed: 7 minutes
How to decide if you should pay an early termination fee to get our of your electricity contract.
- Understand your current price for electricity.
Grab your most recent electric bill. Take the total amount due and divide by the amount of energy you used (kWh) during this billing cycle to calculate your average rate per kWh.
Luckily, by law, your Texas Electricity Bill will have a section that highlights the average price you paid for electricity service.
- Shop for a better electricity rate.
Use ElectricityPlans.com to easily find a better rate for the same energy usage. Use the Calculate Your Bill feature to check what rate you would be paying now on that bill.
- Compare your current rate vs. what you could be paying
Calculate your possible savings per month, based on your current rate versus what you could be paying.
- Calculate pay-back period on the early termination fee
Divide the early termination fee by the amount you will be saving per month. The result is the number of months of savings it would take for you to make your money back on the early termination fee.
- Decide if the savings is worth
Only you can decide if it’s worth it to you. If your savings on your monthly bill will pay you back on the early termination fee within 4-5 months, go ahead and switch. And if you have more than 2 years remaining in your contract, a payback of 8-10 months is great.
Just remember, the early termination fee will be due when you switch away from your provider. And your savings from switching will come in over time. So if cash is an issue, take that into account.
The Early Termination Fee (ETF) for your Texas electricity contract varies by provider and contract term. ETFs range from $150 to $500 depending on the contract term. Some providers charge a set amount per month remaining in your contract.
Your Early Termination Fee (ETF) is listed on the Electricity Facts Label and is part of your contract. Your provider likely sent this to you via email when you enrolled. Can’t find it? Call your retail electricity provider and ask, or check your online account. Knowing your ETF is important when deciding if you should cancel your electricity contract to get a better rate.
Run the Numbers: Should I Cancel My Electricity Contract When Rates Drop?
Here’s a more concrete example, using actual prices from 2022 in Texas.
Monica has an average sized home in Houston, using 12,000 kWh annually, or 1000 kWh a month.
She signed up for a 36 month contract in June 2022. At the time, she picked a low cost plan that averaged 16.6 cents per kWh at 1000 kWh a month.
Fast forward to Spring 2023. Now she can get a 36 month contract for 12.8 cents per kWh. That’s a 22% price cut.
She could save $37 a month on her electricity bill by switching to a new rate. The decision here is, “is it worth it to pay a cancellation penalty and switch electricity plans?”
For Monica, the decision is clear. She’ll pay the $350 early termination fee and switch. Within 9 months she’ll have saved enough money to pay herself back for that termination fee. And then she’ll have a much lower electricity rate going forward!
Shop for a Lower Electricity Rate and Compare Plans
Scenario #2: “I’m Moving But I’m in a Contract”
You’re moving and you’re in a long-term contract with your electricity provider. Fortunately, you are protected.
If you are moving, you will not have to pay an early termination fee for your electricity contract in Texas.
Your provider may require proof of your change of address in order to waive the cancellation fee. Usually, just providing a forwarding address for your final bill may be enough.
If you are moving within the provider’s service area, you may be able to transfer your existing contract to your new address but you are not required to.
TIP: If you are moving, check the current rates in your area. If your electricity contract is cheaper than current offers, take it with you. If not? Cancel it with no penalty and sign up for a cheaper rate.
Scenario #3: “I Found a Better Rate the Next Day”
Most deregulated states give you two or three business days to cancel your contract without penalty. For example, in Texas you have three business days to change your mind after you sign up with a provider.
If you find a better rate a day or two later, it’s not a problem. The number of days that you have to change your mind is outlined in the terms of service included with your new electricity contract.
Gexa Energy and TXU Energy are just some of the electricity providers with a satisfaction guarantee. If you sign up for one of their plans and change your mind within the first 60 days, you can change to any one of their plans with no ETF (conditions apply…of course).
Stuck in a Bad Contract With Your Electricity Provider
It’s not a good feeling to be stuck in an unfavorable contract with your electricity provider.
Know that you have options and you don’t have to wait until the end of your contract term to make a change.
After evaluating your specific contract, you may come to the conclusion that paying an early termination fee makes good economic sense because it saves you money in the long run. ElectricityPlans.com helps you compare electricity rates and find the best plan for you.
Electricity Shopping Reminder Service
One of the biggest mistakes we see in electricity shopping isn’t picking the wrong plan. It’s forgetting to shop when your electricity contract expires. If that happens, you’ll pay a variable electricity rate that can be 30-50% higher than available fixed rates.
Sign up for our electricity plan expiration reminder. Just let us know your contract expiration date. We’ll send you reminders to shop starting 60 days in advance of your electricity plan expiration.