Every mistake in this article has cost at least one Texas business at least $10,000, and several of them have cost businesses well into six figures. None of them require sophisticated errors of judgment. They happen because the buyer trusted a process that wasn't designed to protect them, missed a deadline they didn't know existed, or accepted contract language they didn't fully read.
This isn't a list of theoretical risks. Each of these seven energy procurement mistakes has produced real, measurable losses for Texas commercial buyers repeatedly. Each is preventable with straightforward attention. And each is more common than commercial buyers assume, because the incentives of the parties selling them contracts don't reward transparency.
Read this before your next contract signing, your next renewal, or the next time a broker sends you a "great deal" that closes at end of week.
Mistake #1: Accepting the Incumbent's Renewal Quote Without a Competitive RFP
What it looks like: Your current REP sends a renewal notice 60 days before your contract expires. The renewal offer comes attached. It looks reasonable. You sign it.
Why it happens: Signing the renewal is the path of least resistance. Nobody at the business has bandwidth to shop. The incumbent has your account information, so switching feels risky. The rate the incumbent quotes looks similar to what you're paying, so it seems fine.
What it actually costs: Incumbent renewal quotes for Texas commercial customers are commonly 8% to 20% above what a competitive RFP would produce for the same customer. On a mid-sized commercial account paying $50,000 per year in electricity, an 8% premium is $4,000. Over a 24-month contract, that's $8,000 in avoidable cost. For larger accounts, the numbers scale accordingly. A 500 kW account paying $200,000 per year could pay $16,000 per year above market for two full years: $32,000 in preventable spend.
The incumbent knows most customers won't shop. They price accordingly. If you don't force competition, you don't get competitive pricing.
How to avoid it: Every renewal cycle, solicit quotes from at least three REPs beyond your incumbent. Provide identical specifications to each. Compare all offers on total delivered cost. Then give your incumbent one opportunity to match the best competing offer if you'd prefer to stay with them. This process typically takes 20 to 40 hours of internal effort or a modest fee for a supplier-neutral consultant. The savings routinely justify the investment 10 times over.
For a walkthrough of when and how to run this process, our overview of commercial electricity contract renewal timing in Texas covers the timeline.
Mistake #2: Comparing Bids on Headline ¢/kWh Instead of All-In Effective Rate
What it looks like: Three REPs bid on your contract. Their quotes are 8.5¢/kWh, 8.9¢/kWh, and 9.1¢/kWh. You pick the 8.5¢/kWh bid because it's the lowest. Twelve months later, the 8.5¢/kWh contract is producing higher actual bills than the 8.9¢/kWh contract would have.
Why it happens: The headline ¢/kWh is the number everyone talks about. It's on the marketing materials, in the sales pitch, in the summary of the bid. Comparing three numbers feels simple.
The problem: the headline rate is only one component of what determines your bill. TDSP delivery pass-throughs, riders, base charges, bandwidth adjustments, ancillary services allocations, and taxes all affect the final number. Different products handle these components differently. Two contracts with different headline rates can produce very different actual bills.
What it actually costs: Real Texas commercial contract comparisons routinely show effective rate differences of 5% to 15% between bids that had headline rate differences of less than 3%. A 300,000 kWh annual commercial account choosing based on 0.5¢/kWh headline difference (approximately 1,500apparentsavingsperyear)canendupspending8%moreactualdollars(4,800 per year higher effective cost) because the "cheaper" bid had worse pass-through terms.
How to avoid it: Compare bids on total delivered cost calculated against your actual expected usage, not on headline ¢/kWh. This requires:
- Requiring bidders to disclose all pass-through mechanisms and their current effective amounts
- Calculating each bid's expected total monthly cost using your historical usage
- Adding TDSP delivery charges at current tariff rates
- Adding applicable taxes and PUC assessment
- Comparing the resulting total across bidders
This calculation takes 30 to 60 minutes per bid with a spreadsheet. It's the single highest-return step in commercial energy procurement, and it's routinely skipped. Our guide on how to read a commercial energy broker proposal covers the mechanics of the bid comparison.
Mistake #3: Missing the Renewal Window and Defaulting to Holdover Pricing
What it looks like: Your contract expiration notice arrives at an email address no one monitors. Or the person who signed the original contract left the company. Or the notice arrived and you meant to deal with it but got busy. The contract expires. Your bill for the next month arrives at more than double the previous month.
Why it happens: Contract expiration is a specific date, but the responsibility for tracking it typically isn't clearly assigned. The REP has no incentive to make sure the customer sees the notice; higher holdover pricing is more profitable than a competitive renewal. The customer relies on the notice, which sometimes doesn't reach them.
What it actually costs: Texas commercial holdover rates typically run 2 to 3 times the expired fixed rate. On a mid-sized commercial account, the difference between holdover pricing and a competitive renewal is commonly $3,000 to $6,000 per month, sustained until the customer notices and acts (which is typically 1 to 3 billing cycles).
A Dallas manufacturing plant that missed its 2024 renewal spent $18,400 on holdover pricing over two billing cycles before the operations manager caught the issue and initiated a switch. The competitive renewal would have cost approximately $9,200 for the same two months. Total avoidable loss: $9,200 in two months, purely because of a missed calendar reminder.
How to avoid it:
- At every contract signing, immediately calendar the expiration date with reminders at 12 months, 6 months, 90 days, and 30 days before expiration.
- Assign renewal responsibility to a specific role (not a specific person; people leave, roles persist).
- Confirm the email address on file with the REP annually, particularly after any personnel changes.
- Read every renewal notice within 48 hours of receipt, even if the actual decision doesn't need to happen for weeks.
- Start the competitive renewal process 6+ months before expiration, not after receiving the incumbent's notice.
Our detailed guide on holdover rates in Texas commercial electricity covers the mechanics and recovery process.
Mistake #4: Not Reading Bandwidth and Swing Clauses
What it looks like: Your business grows or shrinks during the contract term. Your monthly usage changes substantially compared to the forecasted usage in the contract. The next bill includes a "bandwidth adjustment" or "swing charge" that adds thousands to your monthly cost. Nobody remembers signing anything that produced this.
Why it happens: Bandwidth clauses are typically buried in the contract's fine print. They're not featured in the sales pitch. Many buyers don't understand what they mean at signing. When usage changes during the term (growth, contraction, operational shifts, seasonal changes), the clauses activate and produce charges the buyer never anticipated.
What it actually costs: A restaurant group that closed 3 of 15 locations during a 24-month contract triggered a bandwidth breach that produced $23,000 in additional charges before the operations team caught it and negotiated with the REP. A software company that doubled its office space during a 24-month contract triggered a different bandwidth provision that added $8,000 in adjustments before renegotiation.
Both businesses had signed standard REP contracts without particular attention to the bandwidth language. The clauses functioned exactly as written. The businesses simply didn't understand what they'd signed.
How to avoid it:
- Read the bandwidth section of every contract before signing.
- Understand the tolerance range (typically ±10% to ±20% of forecasted usage) and how it's measured (monthly, quarterly, annually).
- Understand what triggers the adjustment and how the adjustment is calculated.
- Negotiate wider tolerance ranges (or negotiate away the bandwidth clause entirely for larger accounts).
- Include specific carve-outs for anticipated changes: planned expansion, potential closures, seasonal variation.
For a full walkthrough of these clauses, our guide on bandwidth and swing clauses in commercial energy contracts covers the specifics.
Mistake #5: Being Billed on the Wrong Rate Class (and Not Catching It)
What it looks like: Your account is on a specific TDSP rate schedule. That schedule may or may not be the right one for your current load profile. If your operations have changed (usage grew or shrank materially) since the last rate class review, you might be on a schedule that costs you more than the correct schedule would.
Why it happens: TDSP rate class assignment is set when the account is first established and typically doesn't get revisited unless someone specifically requests a review. If your peak demand grew from 8 kW to 15 kW (crossing the demand-metered threshold in most territories), your account should transition to demand-metered pricing. If it grew from 45 kW to 25 kW (dropping below the threshold after equipment upgrades), it should transition back. Neither transition happens automatically.
Some rate classes are meaningfully more expensive than others for a given usage pattern. Being billed on the wrong class is like paying business-class fares for economy-class travel.
What it actually costs: A commercial building with peak demand consistently below 10 kW after LED lighting retrofits was still being billed on Oncor's Secondary Service Greater Than 10 kW schedule (which includes substantial demand charges). Correcting the classification to the correct sub-10 kW schedule produced approximately $340/month in savings, or roughly $4,000 per year.
A different building with peak demand that had grown to 25 kW after equipment additions was still being billed on the sub-10 kW schedule (which produces higher effective rates on high-kWh accounts). Correcting the classification saved approximately $210/month.
Both errors had been running for over a year in each case. Total combined avoidable loss: approximately $8,000 across the two accounts.
How to avoid it:
- Pull your last 12 months of billing history annually.
- Verify the rate class matches your current peak demand consistently.
- If your peak demand has crossed a threshold (up or down), request a rate class review from your REP or TDSP.
- Include rate class verification as a standard element of your commercial electricity bill audit.
Our guide on auditing a commercial electricity bill in Texas covers the full audit process, including rate class verification.
Mistake #6: Not Knowing (or Asking About) Broker Margin
What it looks like: A broker presents you with a "great" contract quote. You sign it. What you don't know: the broker added an undisclosed margin of 0.5¢/kWh to 1.5¢/kWh on top of the REP's actual pricing, without telling you. That margin gets paid to the broker for the life of the contract, out of your monthly bill, forever.
Why it happens: Broker compensation in commercial energy is often structured as a per-kWh adder to the underlying REP pricing. The REP quotes the broker one price; the broker presents you a different price. The difference is the broker's margin, and it's paid by you, out of your electricity bill, for every kWh delivered during the contract term.
This is legal. It's not fraud. Many brokers are transparent about their margin structure when asked. Many others aren't.
What it actually costs: A commercial account using 400,000 kWh per year pays an additional $2,000 per year for every 0.5¢/kWh of undisclosed broker margin, or $4,000 per year for every 1¢/kWh. Over a 24-month contract, that's $4,000 to $8,000 flowing from the customer to the broker without the customer knowing it's happening.
Larger accounts have larger exposure. A 3 MW industrial account using 10 million kWh per year pays $50,000 to $100,000 per year for every 0.5¢/kWh to 1¢/kWh of undisclosed margin, or $100,000 to $200,000 over a two-year contract.
The customer sees only the "great rate" the broker presented. The broker sees the actual REP pricing (below what the customer signed) plus the margin the broker built in.
How to avoid it:
- Ask every broker directly: "What is your margin on this contract, expressed in ¢/kWh, and how is it calculated?"
- Insist on written disclosure of broker compensation, either as a fixed fee, a per-kWh adder, or a percentage of total contract value.
- Compare quotes across brokers with the understanding that margin structures differ.
- Consider working with supplier-neutral consultants who charge disclosed flat fees or transparent per-kWh margins rather than embedded compensation.
Electric Decisions operates on a fully disclosed compensation model with every commercial procurement engagement. Our margin, however structured, is disclosed in writing before contract signing. That transparency is one of the reasons the 5-step energy procurement process for Texas commercial buyers produces different outcomes than opaque broker engagements. Our guide on how to read a commercial energy broker proposal covers what to look for when evaluating broker offers.
Mistake #7: Signing the Wrong Contract Term for Current Market Conditions
What it looks like: You sign a 36-month contract during a period of elevated ERCOT forward curve prices, locking in above-market pricing for three full years. Or you sign a 12-month contract during a period of favorable curve pricing, exposing yourself to renewal risk in a market that may have moved unfavorably by the time your contract expires.
Why it happens: Contract term selection is usually treated as an operational preference ("we like 24-month contracts") rather than a market-informed decision. Buyers pick a standard term without evaluating whether the current market environment favors longer or shorter commitments.
The relationship between market conditions and optimal term:
- Elevated forward curve, above multi-year averages: shorter terms preserve flexibility to reprice when conditions normalize
- Favorable forward curve, below multi-year averages: longer terms lock in more of the favorable pricing
- Neutral or uncertain forward curve: standard 24-month terms are usually appropriate
What it actually costs: A buyer who locked a 36-month contract at $75/MWh energy rate during a mid-2022 natural gas price spike paid roughly $18/MWh above the pricing available for a 24-month contract signed in early 2023. On 600,000 kWh annual usage, that's $10,800 per year in avoidable cost, or $32,400 across the 36-month term.
A different buyer who signed a 12-month contract in late 2023 (a favorable window) had to renew in late 2024 at meaningfully higher pricing than would have been available on a 24- or 36-month contract signed at the original time.
How to avoid it:
- Before signing any contract, review where the ERCOT forward curve currently sits relative to recent history (2 to 5 year lookback).
- If the curve is elevated, consider 12- to 18-month terms to preserve flexibility.
- If the curve is favorable, consider 24- to 36-month terms to lock in the favorable pricing.
- If the curve is neutral, default to a 24-month term.
- Don't confuse this with speculation; you're not predicting where the market will go, you're responding to where it currently sits.
Our guide on commercial electricity contract renewal timing in Texas covers term selection alongside timing considerations, and our fixed vs indexed electricity contracts guide covers how the current market environment should influence product structure choices as well as term length.
The Pattern Across All Seven Mistakes
Look at the seven mistakes together and a common thread emerges: they all happen when the buyer delegates evaluation and decision-making to parties whose incentives aren't perfectly aligned with the buyer's interests.
- The incumbent REP benefits from the buyer accepting the renewal without shopping.
- The bidder benefits from headline-rate comparisons that hide unfavorable pass-through terms.
- The REP benefits from customers missing renewal windows and transitioning to holdover pricing.
- The bidder benefits from buyers not reading bandwidth clauses that eventually produce penalty charges.
- The TDSP has no incentive to proactively identify accounts on wrong rate classes.
- The broker benefits from margin that isn't disclosed.
- The bidder benefits from selling long-term contracts even when market conditions favor shorter terms.
None of this makes REPs or brokers villains. They're commercial actors responding to normal incentives. But relying on them to protect your interests, when their compensation depends on outcomes that aren't necessarily your best outcomes, produces the pattern above.
Supplier-neutral procurement, by definition, aligns evaluation incentives with the buyer's interests. Electric Decisions is not selling you electricity. We are not compensated by the REPs whose contracts we evaluate. Our margin is disclosed in writing. We work through the documented 5-step energy procurement process for Texas commercial buyers that runs every deal the same way, from initial data collection through contract execution, so that no step gets shortcut in ways that create the seven mistakes above.
The Audit Checklist for Your Current Contract
If you already have a Texas commercial electricity contract in place, run through this checklist to identify which of the seven mistakes may already be affecting you.
Contract expiration date: Do you know it? Is it calendared? Are there reminders set at 12, 6, and 3 months?
Original bidding process: Did you get competitive quotes before signing? How many? From whom?
Rate class: Is your current account billed on a rate class consistent with your current peak demand? When did you last verify?
Bandwidth or swing clauses: Do you know what your tolerance range is? Under what conditions would you trigger adjustments?
Broker margin: If you signed through a broker, do you know their compensation structure? Was it disclosed in writing?
Effective rate: What is your actual all-in effective rate (total bill divided by kWh)? How does it compare to current market comparable pricing?
Auto-renewal: Does your contract have an auto-renewal clause? What's the opt-out notice window?
Any "no" or "I don't know" answers indicate specific action items. For a full audit process, our guide on auditing a commercial electricity bill in Texas covers the mechanics.
Frequently Asked Questions
What are the biggest mistakes when buying business electricity in Texas?
The most expensive mistakes typically involve accepting the incumbent's renewal quote without shopping (produces 8% to 20% above-market pricing), missing the renewal window (transitions customer to holdover pricing 2 to 3 times the expired rate), and not understanding bandwidth or auto-renewal clauses (can produce unexpected charges during the contract term). Comparing bids on headline ¢/kWh instead of all-in effective rate is another common error. Each of these mistakes routinely costs mid-sized Texas commercial customers between $5,000 and $30,000 across a single contract term.
How do I avoid getting overcharged on business electricity?
Run a competitive RFP process at every renewal (not just when your current contract is nearly expired). Compare bids on total delivered cost against your actual expected usage, not just headline rates. Verify your rate class is correct for your current load profile. Read bandwidth, ETF, and renewal clauses before signing. Ask brokers to disclose their margin in writing. Audit your bills annually to catch classification errors and pass-through anomalies. Most of these steps take minutes; the savings routinely justify the effort many times over.
What is a common energy contract mistake to avoid?
Signing without a competitive RFP is the most common. Buyers accept the incumbent's renewal offer or the first quote from a broker who cold-called them, without soliciting alternative bids. This routinely produces 8% to 20% above-market pricing. A structured RFP with 3 to 5 bidders takes 30 to 60 days but typically produces meaningful savings that dwarf the effort invested.
What is broker margin in a commercial electricity contract?
Broker margin is the compensation a broker earns from arranging your contract, typically structured as a per-kWh adder on top of the underlying REP pricing. In transparent broker relationships, this margin is disclosed in writing before signing. In non-transparent relationships, it's embedded in the quoted price without disclosure. Margins commonly range from 0.3¢/kWh to 1.5¢/kWh, which produces substantial cumulative compensation on multi-year contracts. Every broker should be willing to disclose their margin structure when asked directly.
How much does missing a contract renewal cost in Texas?
Holdover rates on Texas commercial contracts typically run 2 to 3 times the expired fixed rate. On a mid-sized commercial account, the difference between holdover pricing and a competitive renewal is commonly $3,000 to $6,000 per month, sustained until the customer catches it and initiates a switch (typically 1 to 3 billing cycles). Total avoidable losses from missed renewals routinely range from $5,000 to $30,000 for mid-sized accounts, and can be much larger for enterprise accounts.
What is a bandwidth clause and why does it matter?
A bandwidth (or swing) clause specifies the tolerable range of actual usage vs. forecasted usage in a commercial energy contract, typically ±10% to ±20%. If your usage falls outside the range, the contract typically applies adjustment charges. Businesses that grow or shrink during the contract term routinely trigger these clauses without realizing the mechanism was in place. Adjustments can add thousands to monthly bills. For a detailed walkthrough, see our guide on bandwidth and swing clauses in commercial energy contracts.
Can I be on the wrong rate class in Texas?
Yes, and it's more common than most commercial buyers realize. TDSP rate class assignment happens when the account is first established and typically doesn't get reviewed automatically as load profiles change. Businesses whose peak demand has grown across a threshold (typically 10 kW, or 5 kW for TNMP territory) or shrunk below it are often still billed on the original schedule. This can produce hundreds to thousands of dollars of avoidable annual cost.
How do I know if my broker is being transparent about their compensation?
Ask directly: "What is your compensation on this contract, expressed in ¢/kWh or as a percentage of contract value, and is it built into the quoted price?" Legitimate brokers will answer in writing. Brokers who deflect, change the subject, or provide vague answers are typically not being transparent. Consider whether working with a supplier-neutral consultant with disclosed flat-fee or transparent per-kWh compensation would produce better outcomes.
What is the ERCOT forward curve and why does it matter for term selection?
The ERCOT forward curve is the set of wholesale electricity prices at which market participants can currently buy or sell energy for future delivery periods. When the curve is elevated relative to multi-year averages, shorter contract terms preserve flexibility to reprice when conditions normalize. When the curve is favorable, longer terms lock in more of the favorable pricing. Signing a contract without regard to current curve conditions is like buying a home without checking whether interest rates are high or low.
Should I fire my current broker?
Not necessarily. Some brokers add genuine value: they run competitive RFPs, they redline contracts, they track renewal dates, and they disclose their compensation. Others don't. If your current broker consistently produces competitive outcomes, discloses their margin, and manages your account professionally, the relationship is working. If your outcomes are consistently below market, if your broker deflects margin questions, or if you've experienced any of the seven mistakes above under their watch, it's worth evaluating alternatives.
What is the difference between a supplier-neutral consultant and a broker?
A traditional broker typically earns compensation through per-kWh adders on the contracts they arrange, creating some incentive to prefer higher-margin products or providers regardless of buyer fit. A supplier-neutral consultant charges disclosed fees (flat, transparent per-kWh, or hourly) that don't depend on which REP or product is selected, aligning evaluation incentives with the buyer's interests. The distinction matters most for buyers whose contracts are large enough that undisclosed margin represents meaningful money. Our commercial electricity comparison for Texas businesses operates on the supplier-neutral model.
How often should I audit my commercial electricity contract?
Full audits are worth running annually, and at any contract renewal. The annual audit catches classification errors, pass-through anomalies, and any drift between contract terms and actual billing. The renewal audit ensures the incoming contract terms are correctly reflected on the first several bills. Between annual audits, spot-checking each monthly bill takes 10 minutes and catches most acute errors.
Fixing What Is Broken
If you recognize any of the seven mistakes in your current situation, the response depends on which mistakes apply and how far along you are in the current contract cycle.
If you're currently on holdover pricing: Act within 24 to 48 hours. Get competitive quotes, sign a new contract, and initiate the switch. Every day of continued holdover exposure is avoidable cost. Our guide on holdover rates in Texas commercial electricity covers the recovery process.
If you're within 90 days of contract expiration: Start a competitive RFP immediately. Even a rushed process is dramatically better than accepting the incumbent's renewal offer or defaulting to holdover.
If you're mid-contract and suspect issues (wrong rate class, bandwidth exposure, broker margin, etc.): Run a full contract and bill audit. Some issues can be corrected mid-contract; others must wait for renewal but need to be avoided in the next cycle.
If you're contract-secure but haven't run a proper procurement in years: Calendar your next renewal properly, start planning 6+ months out, and commit to a structured process next time.
Electric Decisions runs supplier-neutral commercial electricity procurement for Texas businesses across all these scenarios. We do not sell electricity. Our compensation is disclosed in writing before every engagement. We handle the competitive RFP, the bid evaluation, the contract redlining, and the ongoing management, so buyers can focus on running their businesses instead of tracking energy market movements. Our documented 5-step energy procurement process for Texas commercial buyers applies whether the goal is preventing the next mistake or recovering from a current one.
The single highest-return next step for most buyers is a proper contract audit. Our commercial electricity bill audit guide walks through the reconciliation process in detail.
Every mistake in this article is avoidable. Most are avoidable in less than an hour of proper attention. The businesses that pay the cost of these mistakes aren't unsophisticated; they just delegated evaluation to parties whose interests didn't perfectly align with theirs. Reclaiming that evaluation, whether internally or through a genuinely supplier-neutral advisor, is the single highest-return change most Texas commercial buyers can make to how they procure electricity.
