Fixed vs Index vs Block: Choosing a Commercial Electricity Contract Structure
Fixed-rate contracts lock a set per-kWh price for the full term and fit the vast majority of Texas commercial accounts under roughly 50,000 kWh/month. Index contracts float with ERCOT wholesale prices and fit only large, sophisticated loads that can absorb monthly swings. Block-and-index blends both for predictable base load plus variable peak usage.
A Grand Prairie warehouse pulling 33,000 kWh/month, for instance, sees dramatically different bills depending on contract structure alone. On a fixed 7.8¢/kWh supply contract, that's $2,574/month in energy charges, and it doesn't move for the life of the term. Run that same 33,000 kWh through an index contract during a summer ERCOT price spike, and a rate north of 14¢/kWh pushes the bill to $4,620 for that one cycle. That's a $2,046 swing on a single invoice, and it's exactly why contract structure matters more than the headline rate.
The Three Contract Structures, Plain English
Fixed means your per-kWh energy rate is locked for the full term: 12, 24, or 36 months. It doesn't matter what happens in the ERCOT market that August; your rate on the bill is the rate you signed. Index means your rate resets, usually monthly, tied to ERCOT wholesale settlement prices plus a supplier margin, so it moves with the market, up or down. Block-and-index is a hybrid: you buy a fixed block of kWh at a set price to cover your predictable base load, and whatever usage falls outside that block floats on index pricing. Three structures, three very different risk profiles for the same building.
Fixed Rate: The Default for Most Small Commercial Accounts
We recommend fixed-rate contracts for the large majority of Texas commercial accounts: restaurants, retail stores, professional offices, gyms, salons, most anything under roughly 50,000 kWh/month. Texas' average all-in commercial rate sits at 8.66¢/kWh versus 14.19¢/kWh nationally (EIA, 06/2026), which tells you the deregulated Texas market is already doing its job on price. (Both EIA figures are all-in averages, supply plus delivery combined, so treat them as market context, never as something to compare a supply-only quote against.) There's no reason to layer market volatility on top of a business that's already thin-margin and cash-flow sensitive. A restaurant running 5,000 to 35,000 kWh/month, a retail shop at 8,000 to 90,000 kWh/month, or an office at 5,000 to 60,000 kWh/month all fit the same logic: you need to know your electric line item three months from now, not guess at it.
Index Contracts: Who Actually Benefits, and the Real Exposure
Index contracts fit a narrow slice of the market: large, interval-metered (IDR) accounts with round-the-clock operations and someone internally tracking ERCOT pricing week to week. Think Midland and Odessa in the Permian Basin, where energy-services firms and oilfield operations commonly run 48,000 to 55,000 kWh/month and treat electricity procurement as an active job, not a set-and-forget bill. We don't predict where ERCOT hub prices go next summer. Nobody credibly can. What we can say is that a 50,000 kWh/month account, as an illustrative example, might see 6¢/kWh in a mild shoulder month ($3,000) and 14¢/kWh in a tight summer month ($7,000). That $4,000 swing in a single cycle is the actual risk you're accepting, not a hypothetical.
Block-and-Index: The Middle Ground for Large, Predictable Loads
Block-and-index is built for businesses with a solid, predictable base load plus a variable peak on top of it: light manufacturing, food processing, larger warehouse operations. You lock a fixed block covering your typical baseline usage, so the bulk of your bill is protected, and let the remainder float on index. Dallas-area suppliers commonly make index and block-and-index structures available to accounts above 50,000 kWh/month, which lines up with where the risk-management math starts to make sense. It's a way to keep most of the budget certainty of fixed while capturing some upside if the market softens, but it only works if someone's watching the variable portion.
- Under 50,000 kWh/month with no dedicated energy-buying staff: go fixed, full stop.
- 24/7 operation in Midland, Odessa, or similar high-load industrial market: index or block-and-index is worth evaluating.
- Predictable base load plus a seasonal or shift-driven peak (manufacturing, distribution): block-and-index.
- Multiple ESI IDs across suites or locations (common in Plano, Irving office parks): bundle them into a single competitive bid regardless of structure.
- Energy-intensive operation on CenterPoint in Houston: remember demand charges, which can run 30 to 40% of the total bill, sit separately from your energy structure and need their own management strategy.
The most expensive mistake we see isn't picking the wrong structure. It's missing the renewal window entirely. Carrollton's mix of office and light-industrial tenants along I-35E frequently rolls onto month-to-month variable rates after a fixed contract expires, often at rates well above what a re-bid would have secured. Mark your renewal window early: we make the case for starting 12 to 18 months out, and 90 days is the bare minimum.
If you're building out a new location, Frisco's rapid commercial growth is a good example, lock a 24-month fixed rate before construction finishes. Rates negotiated mid-buildout, under time pressure and without usage history, are often worse than rates locked ahead of time, and you avoid a mid-buildout renegotiation headache.
Not sure which structure fits your account? We'll run your usage against current Texas commercial supply rates and tell you straight: fixed, index, or block. No guesswork.
Get My QuoteFrequently asked questions
A fixed contract locks your per-kWh energy rate for the entire term: the same rate in January and August. An index contract resets, usually monthly, based on ERCOT wholesale market pricing plus a supplier adder, so your rate moves with the market every billing cycle.
It can be, in a specific month. But small commercial accounts don't have the cash cushion or the staff bandwidth to absorb a bad month, and one summer spike can erase a year of savings from good months. That's why we don't put small accounts on index as a default.
Generally accounts above 50,000 kWh/month with interval (IDR) metering, round-the-clock operations, and someone internally watching ERCOT pricing. Think Permian Basin energy-services firms in Midland or Odessa. Below that, the risk outweighs the theoretical upside.
You get rolled onto a month-to-month variable rate, which is almost always priced well above your expired fixed rate and can move without notice. This is one of the most common, and most avoidable, ways Texas businesses overpay.
No. Your TDU (Oncor, CenterPoint, AEP Texas, or TNMP, depending on your service territory) delivers your power and handles outages regardless of which supplier or contract structure you pick. Contract structure only affects the energy charge on your bill.