Three plans, three prices, three words on the offer page: fixed, variable, indexed. A shopper reads them as speed settings — locked, loose, and somewhere in between. They aren’t speed settings. They are three different allocations of price risk, and the Public Utility Commission of Texas defines them in rule, which means the words carry obligations that survive whatever the marketing page says.
If you understand nothing else about Texas retail electricity, understand that the plan type determines who absorbs a bad month.
What the rule actually says
The governing text is 16 TAC §25.475, effective January 6, 2022. It requires the Electricity Facts Label to identify whether a product is fixed, indexed, or variable, and it sets out what each one means.
A fixed rate product must have a term of at least three months, and the price — including recurring charges and ancillary service charges — must be the same for every billing period during that term. The rule permits a short, specific list of exceptions: actual changes in TDSP charges, changes in ERCOT or Texas Reliability Entity administrative fees, and qualifying changes in law or regulatory charges outside the provider’s control. That is the complete permitted list in the rule. It is not a general escape hatch.
An indexed product varies according to a disclosed, predefined formula tied to publicly available indices or information. The word that matters there is predefined. The provider does not get to decide month to month what the index means; the formula is disclosed in advance, and your price follows it wherever it goes.
A variable product is priced by a method the provider determines. For residential customers, a variable product can only be month-to-month. There is no such thing as a two-year residential variable contract, because the rule doesn’t allow one.
A wholesale indexed product passes through ERCOT real-time settlement point prices directly. That is the most exposed retail structure in the Texas market, and it is a distinct category from an ordinary indexed plan.
The PUCT’s own consumer material on Power to Choose describes the same three in plainer language: a fixed plan’s price per kWh does not change over the term except for permitted delivery, administrative, and legal changes; variable rates can change month to month; indexed rates are tied to a publicly available index and can change substantially.
Where the confusion is manufactured
Two mistakes account for most of the trouble.
The first is treating fixed as a promise about the bill rather than the rate. It isn’t. A fixed rate fixes cents per kilowatt-hour, subject to the exceptions above. Your bill is rate times usage, plus delivery, plus fees and taxes. In August your usage goes up. In a month where your TDSP’s charges change, the delivery line changes. Neither event breaks the fixed contract, and neither one is a provider doing something sneaky. This is the single most common complaint we hear, and the answer is almost always arithmetic rather than misconduct.
The second is treating variable and indexed as the same thing with different branding. Under PUCT’s description, a variable plan’s rate can vary at the provider’s discretion within its stated method; an indexed plan varies under a formula tied to a public index. Those are not the same kind of uncertainty. With an indexed plan you can, at least in principle, watch the index and know what’s coming. With a variable plan, the method is the provider’s.
There’s a third error worth naming because it shows up in headline-driven shopping. ERCOT publishes day-ahead and real-time market prices, including settlement point prices. Those are wholesale market data. They are not your retail terms. A low real-time price on an ERCOT dashboard does not move a fixed retail rate at all, and it moves an indexed retail rate only through the specific formula in your contract, which will have its own settlement point, lag, and adders.
The documents that decide the question
In Texas, the residential contract isn’t the marketing page. Under §25.475, the contract consists of the Terms of Service document, the Electricity Facts Label, the Your Rights as a Customer document, the enrollment documentation, and, where applicable, a prepaid disclosure statement. Five documents. The rule also requires that all provider communications — advertising, websites, marketing materials, bills, and the contract documents themselves — be clear and not misleading, fraudulent, unfair, deceptive, or anticompetitive.
That structure gives you a concrete test before you enroll. Find the product type on the EFL. If it says fixed, find the list of permitted exceptions and read it. If it says indexed, find the formula, the index name, and the publication source. If it says variable, understand that your price next month is set by the provider’s method and that the plan is month-to-month by rule.
The EFL also has a display convention worth knowing. Residential EFL average-price displays are shown at 500, 1,000, and 2,000 kWh. Those are standardized reference points that let you compare plans. They are not a forecast of your bill. If your house runs 1,400 kWh in a Deep East Texas August, none of the three displayed numbers is your number, and a plan optimized to look good at exactly 1,000 kWh may not be your cheapest option.
A live example of why the documents matter: in June 2026 the PUCT issued a preliminary order in Complaint of Ben Johnson Against Chariot Energy, Docket No. 58631, identifying as issues whether the provider supplied the TOS, EFL, and YRAC, whether it correctly characterized fixed versus variable pricing, and whether it complied with §25.475 disclosures. A preliminary order identifies issues for a proceeding. It does not adjudicate them, and nothing here should be read as a finding against that company. What it does show is that the fixed-versus-variable characterization question is serious enough to be litigated at the Commission.
What to do at renewal
Providers must notify residential customers at least 30 days before a contract expires. If you do nothing, you do not stay on your old fixed price — the provider serves you on a month-to-month product, and §25.475’s terms-of-service provisions require a term contract to state that the default renewal product will be month-to-month if you take no action. You may switch without an early termination charge if the switch is no earlier than 14 days before the notified expiration date.
So the practical sequence is: keep the expiration notice, read the renewal EFL as a new offer rather than a continuation, and compare it at your actual usage rather than at the displayed 1,000 kWh. If you switch, you get a three-federal-business-day penalty-free rescission right after you receive the terms of service. And a contested switch is presumed unauthorized unless the provider produces proof of authorization and verification — which is a protection worth knowing exists.
The strongest objection
The serious counterargument is not that the categories are fake. It’s that they don’t matter much, because over a long enough horizon all retail plans converge toward the same underlying market price. Providers hedge; hedges cost money; the premium on a fixed plan roughly equals the expected value of the volatility it removes. If that’s true, a household is paying for a feeling, and the honest advice would be to take the cheapest product type and stop reading rules.
Part of that argument is right, and it should be conceded plainly. A supplier’s fixed price does include the cost of the hedge and the credit capital behind it. Over many years and many customers, a market that prices risk competently should not hand out free insurance. Anyone who tells you fixed always beats index over time is guessing.
Where the argument breaks down is in the assumption that a household experiences the long run. It doesn’t. It experiences January and August, one at a time, with a specific bank balance. The IMM’s 2025 report put the ERCOT all-in cost of electricity at $38/MWh in 2025, up from $34/MWh, and attributed the increase to a 61% rise in the average daily natural gas index price — that is one year of wholesale movement large enough to matter to a household, and it arrived without asking permission. Convergence in expectation is not convergence in any given month, and a household with no cushion is not indifferent between a smooth path and a rough one with the same average.
The second limit is that the argument assumes the customer will actually manage the exposure. Most won’t. The default outcome of inattention on a fixed plan is a rollover to month-to-month with a notice you can act on. The default outcome of inattention on an exposed product is whatever the formula produced while you weren’t looking. Those are different failure modes, and the category you chose is what determines which one you get.
None of which tells you which plan to buy. It tells you that the three words are not interchangeable, that the rule defines them, and that the EFL is where you find out which one you’re actually signing.
Amerigy Energy is a PUCT-registered electricity broker in Lufkin, registration #BR190721. We’re paid by suppliers, not by you, and we’ll say so before we say anything else. If you want a second read on a renewal offer, that’s what we do.