Fixed vs Index vs Block & Index — which Texas energy contract wins?
Three structures, three risk profiles, one deregulated market that punishes the wrong choice. This table compares them across the criteria that actually matter in ERCOT, the worked examples show the dollars, and the decision framework walks you to the right fit for your load.
Side by side
The same 12 criteria every Texas commercial energy buyer asks about. Scan for the rows that matter most to your business — for most buyers it's budget certainty versus scarcity exposure.
| Criterion | Fixed | Index | Block & Index |
|---|---|---|---|
| Best for | Most businesses; budget-first buyers | Sophisticated buyers with risk capacity | Larger loads wanting both certainty and upside |
| Price set on… | One day, for the whole term | Continuously — wholesale market price | Block fixed at signing; remainder floats |
| Budget certainty | Total — one rate, in writing | None — bills move with the market | High on the block, none on the float |
| Captures market dips | ✗ | ✓ | On the floating portion |
| Exposure to ERCOT scarcity pricing | None (energy rate is locked) | Full — up to the $5,000/MWh offer cap | Limited to the floating share |
| Bill predictability month to month | High | Low | Moderate |
| Who carries the price risk | The supplier | You | Shared, in the ratio you choose |
| Management effort required | Almost none in-life | Active — usage and market watching | Light but regular reviews |
| When wholesale prices are rising | Locking early wins | Every increase hits your bill | Block protects most of the load |
| When wholesale prices are falling | Locked above the market until renewal | Savings flow through immediately | Floating share captures the fall |
| Suits load size | Any — single meter to multi-site | Larger loads that can shift usage | Typically larger commercial & industrial |
| Typical term | 12–60 months (24–48 most common) | Month-to-month or annual | 12–60 months on the block |
The same business, three contracts — illustrative numbers
Take a business using 500,000 kWh a year. The rates below are illustrative — your quotes will differ — but the mechanics are exactly how each structure behaves.
Fixed at 9.5¢/kWh
Every month, every season — the same rate. A calm year, a heat wave and a winter storm all cost the same. The premium over the index average is the price of certainty, and it's known on day one.
Index averaging 8.5¢/kWh
$5,000 cheaper in a calm year. But ERCOT scarcity pricing runs to $5,000/MWh — $5.00 per kWh. If just 2% of this load (10,000 kWh) prices through spike hours averaging $2.00/kWh, that's $20,000 extra — four calm years of savings, gone in one summer.
80% block at 9.0¢ + 20% index
400,000 kWh locked at 9.0¢ ($36,000) plus 100,000 kWh floating at the 8.5¢ average ($8,500). In a spike year only the floating fifth is exposed — the worst case is a fraction of the index scenario's.
Six steps to the right structure for your load
- 1
Pull 12 months of usage
Get your last 12 months of kWh, your peak demand (kW) and, ideally, interval data. The structure decision starts with how much you use and how spiky the load is — not with anyone’s rate card.
- 2
Stress-test your budget tolerance
Ask the finance question first: if a hot August added 30–50% to that month’s power bill, is that an annoyance or a crisis? If it’s a crisis, index is out and your block share should be high.
- 3
Look at where the market is heading
ERCOT peak demand is projected to grow from roughly 85 GW to 145 GW by 2031, with $33B+ of grid investment being recovered through delivery charges. A structurally rising market strengthens the case for locking more, sooner, for longer.
- 4
Decide how much volume must be protected
This is the block-sizing question. Volume you cannot operationally avoid consuming — base load, business hours, production shifts — is the volume a price spike hurts most. Most buyers protect that and let only genuinely discretionary usage float.
- 5
Treat delivery charges as a separate battle
TDSP delivery charges, demand charges and 4CP exposure are set by how and when you consume, not by which supply structure you sign. Whichever contract you choose, have these audited — it’s where overcharges hide.
- 6
Put the structures side by side, in writing
Price your actual load across 30+ suppliers in each structure and compare total annual cost under a calm year and a spike year. UPG runs this comparison for free and puts the recommendation in writing — so the decision is made on your numbers, not on a sales pitch.
Fixed wins when…
- Budget certainty matters more than catching dips
- Nobody in the business can watch the market in-life
- The market is structurally rising — as ERCOT demand forecasts suggest
- A single bad month would genuinely hurt cash flow
Index wins when…
- You can absorb a severe month without distress
- You can shed or shift load when prices spike
- You believe the market is heading down and want full participation
- Someone owns the energy book and actually watches it
Block & Index wins when…
- Your load is large enough to structure (typically 1M+ kWh/yr)
- You want a protected base and market participation on the rest
- Your usage has a predictable base and a variable tail
- Finance wants certainty; operations wants upside — both can have it
Fixed vs Index vs Block & Index — quick questions
Want this comparison run on your actual load?
Send a recent bill and 12 months of usage. We'll price fixed, index and block & index across 30+ suppliers, model a calm year and a spike year, and put a written recommendation in front of you — free.