Here's a real Texas electricity ad that ran this summer: "Find energy savings with rates as low as 7.9¢/kWh." Big brand, huge ad budget, Trustpilot 10K+ reviews badge. Looks legitimate. It is legitimate. And for most Texans who sign up, it's a trap.
Not because the company is lying — the number is technically real. But that 7.9¢ rate only applies inside a narrow usage window most households can't consistently hit. Miss the window and your rate jumps to something like 15.5¢/kWh. Over a year, the "cheap" plan often costs $300-500 more than a plain fixed-rate plan.
This isn't a scam. It's called a bill credit plan, it's fully legal, and it's the single most common trick in the Texas retail electricity market. Every major retailer — TXU, Reliant, Frontier, Gexa, Direct Energy — offers versions of it. This guide walks through exactly how the trick works, the specific math, and the five marketing terms that tell you a plan is a bill credit trap before you even open the fine print.
The pitch that hooks 70% of Texans
The Public Utility Commission of Texas requires every retail plan to publish an Electricity Facts Label (EFL) showing the average price per kWh at three usage tiers: 500 kWh, 1,000 kWh, and 2,000 kWh per month. This exists specifically so consumers can compare plans.
Bill credit plans exploit this disclosure by making the 1,000 kWh number look amazing while the other tiers stay expensive. Retailers can then legally advertise "as low as 7.9¢/kWh" — because at exactly 1,000 kWh usage, that's genuinely what the plan costs. At 999 kWh? Different story. At 2,100 kWh? Different story again.
Here's a real example EFL from a plan actively being sold in Texas today (numbers slightly rounded for clarity):
| Usage tier | Average price/kWh |
|---|---|
| 500 kWh/month | 18.9¢ |
| 1,000 kWh/month | 7.9¢ |
| 2,000 kWh/month | 12.4¢ |
Notice something strange: the price at 1,000 kWh is less than half the price at 500 kWh. In no normal pricing structure does using more of something make each unit cost less than half. That's the tell.
How the math trick actually works
Under the hood, a bill credit plan has two components: a normal energy rate (usually 12-16¢/kWh) plus a fixed dollar credit that kicks in only if your monthly usage falls inside a specific window.
Using the plan above as an example, the actual structure is something like:
- Base energy rate: 15.5¢/kWh
- Bill credit: $100 credit if your usage is between 1,000-2,000 kWh
Now watch what happens at each usage level:
Energy charge: 500 × 15.5¢ = $77.50
Bill credit: $0 — you used less than 1,000 kWh
Total: $77.50
Effective rate: 15.5¢/kWh — nowhere near the advertised 7.9¢.
Energy charge: 1,000 × 15.5¢ = $155.00
Bill credit: −$100 (you're inside the window)
Net cost: $55.00
Effective rate: 5.5¢/kWh — even better than advertised!
Energy charge: 2,000 × 15.5¢ = $310.00
Bill credit: −$100 (still inside window)
Net cost: $210.00
Effective rate: 10.5¢/kWh — decent, but not the 7.9¢ headline.
Energy charge: 2,100 × 15.5¢ = $325.50
Bill credit: $0 — you used more than 2,000 kWh
Total: $325.50
Effective rate: 15.5¢/kWh — punished for one extra kWh.
Read that last one carefully. Going from 2,000 to 2,001 kWh doesn't just cost you 15.5¢ more — it costs you $115.50 more, because you lose the entire $100 credit. There's a cliff at 2,000 kWh, and if you fall over it, the "cheap" plan gets brutally expensive.
The dirty secret: In hot Texas summers, average residential usage is 1,600-2,300 kWh. A meaningful percentage of bill credit customers cross the 2,000 kWh ceiling every July and August. They signed up expecting 7.9¢ and end up paying 15.5¢ in the exact months their bill matters most.
The seasonal trap Texas retailers count on
The real payoff for retailers comes from Texas's massive summer-to-winter usage swing. Let's follow a real Texas household through 12 months on a bill credit plan.
| Month | Usage (kWh) | In window? | Effective rate |
|---|---|---|---|
| January | 720 | No — too low | 15.5¢ |
| February | 680 | No — too low | 15.5¢ |
| March | 810 | No — too low | 15.5¢ |
| April | 950 | No — 50 kWh short | 15.5¢ |
| May | 1,340 | Yes ✓ | 8.0¢ |
| June | 1,780 | Yes ✓ | 9.9¢ |
| July | 2,290 | No — 290 kWh over | 15.5¢ |
| August | 2,410 | No — 410 kWh over | 15.5¢ |
| September | 1,890 | Yes ✓ | 10.2¢ |
| October | 1,100 | Yes ✓ | 6.4¢ |
| November | 790 | No — too low | 15.5¢ |
| December | 860 | No — too low | 15.5¢ |
Out of 12 months, this household hit the credit window in only 4. The other 8 months they paid the full 15.5¢ rate. Their weighted-average annual rate ended up at 13.1¢/kWh — nowhere near the 7.9¢ headline they signed up for.
If the same household had chosen a plain fixed-rate plan at 11.5¢/kWh (widely available in Texas), they would have paid about $175 less over the year — and they wouldn't have had to think about their usage window every month.
How to spot a bill credit plan before you sign
Every bill credit plan is required to disclose the credit structure on its Electricity Facts Label (EFL). But the disclosure is usually buried and written in industry jargon. Here are the five specific things to check.
1. Compare the three EFL price tiers
The EFL shows the average price at 500, 1,000, and 2,000 kWh. On a normal fixed-rate plan, these three numbers will be close to each other — maybe 11.5¢, 11.2¢, 11.1¢. On a bill credit plan, the 1,000 kWh number will be dramatically lower than the other two. If you see 18.9¢ / 7.9¢ / 12.4¢, that's a bill credit plan by definition.
2. Look for "monthly credit" or "usage credit" in the fine print
The EFL's "Other Key Terms and Questions" section must disclose any credit structure. Look for phrases like "monthly credit of $X applied when usage is between Y and Z kWh." If that phrase exists, it's a bill credit plan.
3. Check the term "average price per kWh"
All Texas EFLs show an "average price per kWh" — but this is calculated only at that specific usage tier, including the credit. It is NOT your actual per-kWh rate. Your actual rate (the underlying energy charge) is often listed separately in the EFL, usually labeled "energy charge" or "energy rate" in cents per kWh. That number — not the "average price" — is what you'll actually pay if you miss the credit window.
4. Ignore the marketing name
Bill credit plans have creative marketing names that hide what they are. Some names to watch for: "Free Nights & Weekends," "Cashback Rewards," "Loyalty Credit," "Simple Saver," anything with "Reward" or "Bonus" or "Cashback" in the name. Not all of these are bill credit traps — but the majority use the same structure. Always check the EFL, never trust the plan name.
5. Model your actual usage
Before signing, pull up your last 12 months of bills (available in your online portal with your current provider). Note how many months you were between 1,000-2,000 kWh. If you were in that range fewer than 8 out of 12 months, a bill credit plan will cost you more than a plain fixed rate.
See only true fixed-rate plans in your ZIP.
Live rates. Real providers. Bill credit plans clearly labeled. Free, no signup.
When bill credit plans ARE actually good
I want to be fair here: bill credit plans aren't universally bad. They work well for a specific type of household. If you're in the following situation, one can actually save you money.
You use predictable amounts. If your monthly usage varies less than 300 kWh across the year — which is unusual in Texas but possible for small households in apartments — you may be able to stay inside the credit window every month.
Your average is exactly at the 1,000 or 2,000 kWh landmark. Bill credit plans are engineered to be cheapest at exactly those usage points. If your last 12 months averaged very close to one of those numbers, the plan may work out.
You have tight usage control. Homeowners with smart thermostats, solar offsetting, and disciplined usage habits can sometimes engineer their usage to stay in the window. Most people can't or won't.
For everyone else — which is the vast majority of Texas households — a plain fixed-rate plan without any credit structure is almost always cheaper and always more predictable.
What to shop for instead
The safe alternative is what the industry calls a "flat rate" or "true fixed rate" plan. On these plans, the price per kWh is the same regardless of how much you use. On the EFL, the three usage tiers will all show nearly identical average prices. There's no credit, no window, no cliff.
As of July 2026, real fixed-rate plans in Texas are available in the 10.5-12.5¢/kWh range depending on your city and contract length. That's slightly higher than the 7.9¢ bill credit headline — but it's your actual price, every month, no gotchas.
A pattern to watch for: Some retailers advertise a fixed-rate plan alongside their bill credit plan, but the fixed-rate version is priced at 15-18¢/kWh — deliberately worse than the market so the bill credit plan looks better by comparison. Always shop the fixed-rate plans across multiple retailers, not just within one retailer's menu.
The five marketing terms that mean "bill credit trap"
Marketing copy for bill credit plans reuses the same language patterns. If you see any of these terms in ad copy or a plan name, expect a bill credit structure and read the EFL carefully before signing.
- "Cashback" or "cash rewards" — nearly always means a monthly credit tied to a usage window.
- "Bonus credit" or "monthly bonus" — same structure, softer name.
- "Free nights" or "free weekends" — a specific type of bill credit plan where the "credit" is applied only during off-peak hours. Only works if you can shift most usage to those hours.
- "Loyalty rewards" or "usage rewards" — softer language for the same bill credit mechanic.
- "As low as" pricing — the "as low as" wording almost always signals that the low number applies only inside a narrow window. If the pricing were consistent, they'd say "our rate is" not "as low as."
None of these are illegal or unethical on their own — they're marketing choices retailers are free to make. But you should know what they signal.
The bottom line
Bill credit plans are the reason Texas has the reputation for confusing electricity bills. They exist because they let retailers advertise headline numbers that beat the competition on paper without actually beating the competition on your annual cost. For the majority of Texas households, they cost more than plain fixed-rate plans while requiring constant attention to usage windows.
If you learn to spot the pattern — big gap between the three EFL price tiers, "cashback"/"bonus" language, "as low as" pricing — you can avoid them entirely and shop only the plans that actually deliver what they advertise.
The good news: on our plan comparison tool, we clearly flag bill credit plans separately from true fixed-rate plans so you can compare like-to-like. It's a small thing that saves a lot of Texans a lot of money.