A Dallas dental practice signed a 24-month fixed-rate commercial electricity contract at 8.2¢/kWh in early 2023. The contract expired quietly in early 2025. The office manager, focused on patient scheduling and insurance billing, didn't act on the renewal notice the REP sent 30 days before expiration. The next monthly bill arrived at an effective rate of 18.5¢/kWh, more than double what the practice had been paying. That is holdover rates on Texas commercial electricity in action, and it is one of the most avoidable and expensive mistakes a Texas business can make.
This guide covers exactly what happens when a Texas commercial electricity contract expires without renewal. It explains what a holdover rate is, the typical multipliers you'll see (usually 2 to 3 times the expired rate), the contract clauses that trigger the transition, the difference between holdover and auto-renewal, and the specific steps to avoid the penalty. It also covers what to do if you're already on a holdover rate right now.
What is a Holdover Rate?
A holdover rate, sometimes called a month-to-month (MTM) rate, a rollover rate, a default rate, or a hold-over pricing rate, is the pricing structure a REP applies after a fixed-term commercial electricity contract expires without a new contract in place. The customer continues to receive service, so their meter doesn't go dark, but the price they pay changes from the fixed rate they negotiated to whatever the REP's holdover rate happens to be.
Holdover rates are almost always variable, market-linked, and priced substantially higher than the expired fixed rate. They function as a penalty pricing mechanism: the REP would prefer the customer either sign a new contract or leave, and the punitive pricing is designed to force that decision.
The specific amount depends on the REP, the applicable contract terms, and current wholesale market conditions. But the pattern is consistent: holdover rates in Texas commercial electricity commonly run 2 to 3 times the expired fixed rate, and in extreme cases can be higher.
Different names for the same thing
Various REPs and contracts use different terminology for what is essentially the same mechanism. The names to watch for in your contract:
Holdover rate: The most common industry term. Refers to pricing that applies after the contract's fixed term ends but before a new contract is signed or the customer switches suppliers.
Month-to-month (MTM) rate: Some contracts refer to the post-expiration pricing as a month-to-month rate, emphasizing that the customer is billed monthly with no term commitment.
Rollover rate: Similar to holdover but sometimes used to describe a specific contract clause where the customer rolls over into a defined post-expiration product.
Default rate: Some contracts refer to the post-expiration pricing as the REP's default rate, meaning the rate that applies by default when no other contract terms are active.
Variable rate: Some contracts simply describe the post-expiration pricing as a variable rate that adjusts monthly based on market conditions.
POR (Price on Renewal): A specific concept where the contract auto-renews at a new rate the REP sets at renewal time. Distinct from holdover in that POR is technically a renewed contract, though at unfavorable terms.
Auto-renewal or evergreen rate: Contracts with automatic renewal provisions transition to a new (usually multi-month) commitment at a higher rate unless the customer actively opts out.
The specific mechanism in your contract matters, because the rules for exiting or renegotiating differ depending on whether you're on true month-to-month holdover pricing (where you can typically switch suppliers with 30 days' notice) versus locked into an auto-renewed multi-month term (where early termination fees may apply).
What Triggers a Holdover Rate
The transition from your fixed contract rate to a holdover rate happens on a specific date and under specific conditions. Understanding the trigger mechanics is the first step to avoiding the penalty.
The contract term end date
Every Texas commercial electricity contract has a defined term with a start date and an end date. The contract's fixed-rate pricing applies during that term. On the end date, the fixed pricing terminates. What happens next depends on the contract's post-term provisions.
The notice period
Most Texas commercial contracts require the REP to notify the customer of contract expiration at some specified time before the end date. Typical notice periods run 30 to 90 days, though shorter and longer periods exist. The notice typically arrives by email or physical mail to the address of record on the account, and it discloses the impending expiration, any auto-renewal provisions that will apply, and the customer's options.
If the notice is sent to an outdated email address, a former employee, or a shared inbox no one monitors, the customer may not see it. This is one of the most common ways businesses end up on holdover rates: not fraud or unclear terms, but simply a notice that reached an inbox no one was watching.
The customer's action window
Between the notice date and the contract expiration date, the customer has an opportunity to act. Options typically include:
- Sign a new contract with the current REP at newly negotiated terms
- Sign a new contract with a different REP and switch at expiration
- Let the contract expire and accept whatever post-expiration provisions apply
- (In some cases) actively opt out of auto-renewal if the contract has one
Doing nothing is a decision, and the consequence is usually a transition to whatever the contract's post-expiration pricing is. That's almost always the highest-cost outcome.
The transition to holdover
On the day after the contract's end date, the pricing changes. The meter continues to record usage, electricity continues to flow, and the customer continues to receive service. The next monthly bill will reflect the new pricing structure. Depending on the billing cycle, this bill may arrive weeks after the transition, meaning the customer may not realize they're on a holdover rate until they've already accumulated a month or more of high-cost usage.
Typical Holdover Rate Multipliers
The specific multiplier of holdover rate vs. expired fixed rate varies widely, but industry patterns are consistent enough to describe.
For most Texas commercial customers coming off a competitively-priced fixed contract:
- A typical holdover rate runs 1.5 to 2.5 times the expired fixed rate.
- In tight or volatile market conditions, holdover rates can run 2.5 to 3.5 times the expired fixed rate.
- In extreme market conditions (following a major winter event or during a summer peak crisis), holdover rates can spike much higher.
A worked example
Consider a mid-sized Texas commercial account:
- Expired fixed rate: 8.0¢/kWh
- Monthly usage: 30,000 kWh
- Peak demand: 100 kW
- Applicable TDSP delivery and other charges: approximately $1,200 per month
Under the fixed contract, the monthly bill (energy plus delivery, pre-tax) was approximately:
- Energy: 30,000 × $0.08 = $2,400
- Delivery: $1,200
- Total: approximately $3,600
After the contract expires and the customer transitions to a holdover rate of, say, 18¢/kWh (a 2.25x multiplier), the same monthly usage produces:
- Energy: 30,000 × $0.18 = $5,400
- Delivery: $1,200
- Total: approximately $6,600
Monthly increase: $3,000. Annual exposure if the customer stays on holdover for a full 12 months: $36,000.
This is for a single mid-sized account. Larger accounts, multi-site operations, and accounts with higher usage face proportionally larger exposure. A restaurant chain with 15 locations that averages $500 in additional monthly holdover cost per site faces $90,000 in avoidable annual expense.
Why holdover rates are so high
REPs price holdover rates aggressively for several reasons, most of them structural rather than punitive.
Wholesale hedging risk: During your fixed contract, the REP hedged your load in the wholesale ERCOT market, matching your expected usage to forward-purchased energy. When your contract expires, the REP no longer has that hedge in place for your usage. Continuing to serve you means buying energy at real-time wholesale prices, which are volatile. The REP prices the holdover rate to cover that risk plus a margin.
Customer retention economics: REPs prefer customers on contracts, both because of the predictability and because customer acquisition costs are high. Aggressive holdover pricing is designed to force the customer's hand: either sign a new contract, or leave to a different REP. Either outcome is preferable to the REP than continuing to serve a hedge-less month-to-month customer at low margin.
Recovery of contract-period discounts: Some commercial contracts are priced below their true economic cost during the fixed term, betting on either renewal or holdover pricing to recover margin over the account's lifetime. When the fixed term ends, the holdover rate is where the REP recovers that structural gap.
Market volatility premium: ERCOT wholesale prices can move sharply on hot days, cold days, or during grid stress events. A REP serving a customer month-to-month has full exposure to that volatility and prices it in.
None of these reasons justify a customer accepting a holdover rate. They explain why the rate is high, not why the customer should pay it.
Contract Clauses that Govern Holdover
If you want to understand what will happen when your contract expires, you need to read the specific clauses in your contract that govern the post-expiration period. These vary substantially between REPs and products.
Auto-renewal or "evergreen" clauses
Some commercial contracts include automatic renewal provisions that convert the account to a new fixed-term contract at the end of the original term. The new term is typically 12 months, sometimes longer, and the new rate is either:
- Set at whatever rate the REP designates at renewal (usually higher than the expired rate)
- Set at a "market rate" determined by a specified formula
- Set at a specific rate disclosed in the original contract
Auto-renewal clauses are legal in Texas as long as they were disclosed at signing. They can be advantageous or disadvantageous depending on the terms. An auto-renewal at a fair market rate isn't necessarily bad. An auto-renewal at a "then-current rate" the REP sets unilaterally usually is.
Auto-renewal clauses typically require the customer to opt out (usually with 30 to 60 days' notice before expiration) to prevent the renewal from taking effect. Missing this window can result in being locked into a new 12-month term at unfavorable rates, with an early termination fee if you try to leave.
Month-to-month or "MTM" clauses
Other contracts do not auto-renew but instead transition the account to a month-to-month pricing arrangement at expiration. This is usually the true "holdover" scenario. The customer can typically switch suppliers at any time with the standard notice period (usually 30 days), but is subject to the elevated MTM rate until they do.
Notice provisions
Both auto-renewal and MTM clauses typically include notice provisions specifying how the REP must communicate the impending expiration. The PUCT requires specific disclosures for renewal notices on residential contracts; commercial contracts have somewhat more flexibility, but reputable REPs still notify.
Termination and switching rights
Regardless of the specific mechanism, contract clauses typically specify:
- How much notice the customer must give to leave (usually 30 days)
- Whether any fees apply if the customer switches during the post-expiration period
- The process for initiating a switch
For customers who ended up on holdover unexpectedly, understanding these clauses is the starting point for getting off holdover pricing.
Auto-renewal vs. Holdover: Not the Same Thing
These two mechanisms often get discussed together, but they're structurally different, and the difference matters for what you can do about it.
Auto-renewal
Locks you into a new fixed-term contract, typically 12 months, at the REP's designated renewal rate. To leave before the new term ends, you'll typically face an early termination fee. Auto-renewal is worse when the renewal rate is high, but it does provide price stability for the term.
If you're in an auto-renewed contract, your options are limited: pay the ETF and leave, negotiate with your REP to reset the contract at better terms, or ride out the term until the next expiration and then act more decisively.
Month-to-month holdover
Transitions you to a variable rate with no new term commitment. You can typically switch suppliers with 30 days' notice at any time, without an early termination fee (because you're no longer under contract). The rate is usually higher than auto-renewal rates, but the customer has more flexibility.
If you're on true month-to-month holdover, the fix is straightforward: shop a new contract and switch as soon as possible.
The specific mechanism in your contract determines your escape path. Read the contract before acting.
The Regulatory Framework
Texas commercial electricity contracts operate under the framework established by the Public Utility Commission of Texas (PUCT) and the Texas Utilities Code. The relevant provisions for holdover situations include:
PUCT Substantive Rules under Chapter 25, particularly the subsections on customer protection and contract disclosures.
Notice requirements for contract renewal and expiration, which mandate specific disclosures REPs must provide to customers before contracts change or expire.
Switching rules that establish the process and timing for customers to change REPs, including the standard 30-day notice period for most switches.
Dispute resolution processes through the PUCT Customer Protection Division (1-888-782-8477) for customers who believe a REP has failed to comply with notice requirements or has applied contract terms incorrectly.
Commercial customers (as opposed to residential customers) have somewhat fewer regulatory protections in Texas. The PUCT's consumer protection rules focus more heavily on residential accounts. Commercial contracts are treated more as arms-length business transactions where the parties are presumed to have negotiated the terms. This does not mean commercial customers have no recourse, but it does mean that reading the contract before signing is more important than for residential customers.
For a full walkthrough of contract terms that commonly affect commercial buyers, our guide to Texas early termination fees on electricity contracts covers the ETF and related contract mechanics.
How to Avoid Holdover: Start Early
The single most effective way to avoid a holdover rate is to start the renewal process well before contract expiration. Businesses that treat renewal as a last-minute task end up on holdover more often than businesses that treat it as a scheduled process.
The 6 to 12 month window: watch phase
Six to twelve months before your contract expires, you should be tracking the ERCOT forward curve and building a general view of market direction. This isn't when you lock in a new rate, but it's when you start paying attention. If the forward curve is moving sharply in either direction, you may want to accelerate your action later.
The 3 to 6 month window: evaluate phase
Three to six months before expiration, begin actively evaluating options. Pull 12 months of billing history, compile your interval data, and start soliciting quotes. Most Texas REPs will quote a new contract with a start date up to six months in the future, so this window is where you have the most flexibility.
The 60 to 90 day window: lock phase
Sixty to ninety days before your contract expires, run a formal procurement RFP and select a new contract. Complete the paperwork with plenty of time before your current contract ends, so the new supplier can process the switch and the transition happens on the day your current contract expires (or on your preferred start date). Give the incumbent REP a competitive opportunity if you want, but be prepared to leave if the incumbent's renewal offer isn't competitive.
For a full walkthrough of the timing framework, our overview of commercial electricity contract renewal timing for Texas businesses covers each phase in detail.
What to do if you're inside 30 days of expiration
If you're less than 30 days from your contract expiring and haven't started renewal, act immediately. You may not be able to complete a full RFP process, but you can still:
- Contact your incumbent REP to negotiate a renewal (even a rushed one is better than accepting holdover)
- Contact a supplier-neutral energy consultant who can get you fast quotes
- Sign a shorter-term contract (6 to 12 months) to buy time to do a proper procurement next cycle
The worst option is to let the contract expire without doing anything. Even a mediocre renewal at market rates is dramatically better than a holdover rate.
What to do if you're already on a Holdover Rate
If you've just discovered your contract expired and you're now on holdover pricing, the immediate goals are: stop the bleeding, then shop competitively.
Immediate action (within 24 to 48 hours)
Confirm what happened
Pull your most recent bill and identify the exact pricing being applied. Compare to your prior fixed-rate bills. Confirm whether you're on true month-to-month holdover, an auto-renewed term, or something else.
Read your contract's post-expiration provisions
Determine whether you can switch immediately with 30 days' notice, or whether you're locked into a new term with an ETF.
Contact your REP
Ask specifically what pricing options they can offer for you to stay. In some cases, especially for larger commercial accounts, REPs will offer a rescued fixed rate to prevent the customer from leaving. This offer will typically be at a higher rate than you would have negotiated three months ago, but still much better than holdover pricing.
Short-term action (within 30 days)
Initiate a competitive shop
Get quotes from at least three suppliers. If you're on true month-to-month holdover, sign a new contract with a start date 30 days from now (the standard switching timeline).
Calculate the current cost
Multiply your monthly holdover overage by the expected number of months until your new contract starts. This is your total exposure. It's typically several thousand dollars for a mid-sized commercial account.
Communicate internally
If the person who missed the renewal notice was not the person paying the bill (which is very common), inform whoever is responsible so the responsibility for the next contract cycle is clear.
Longer-term action (within 90 days)
Set up expiration monitoring
Add the new contract's expiration date to your calendar with reminders at 12 months, 6 months, and 3 months before expiration. Assign responsibility to a specific role, not just a specific person (people leave; roles persist).
Establish a renewal process
Document a repeatable process for future renewals so the same failure doesn't happen again. This can be as simple as a checklist or as formal as a written procurement policy.
Common Holdover Scenarios
Different types of Texas businesses tend to end up on holdover for different reasons.
The small business that lost track
A small business owner signed a 24-month contract, tucked the paperwork in a filing cabinet, and forgot about it. The renewal notice arrived at an email address the owner hadn't checked in months. The contract expired, holdover pricing kicked in, and it took two billing cycles before the owner noticed the difference.
Prevention: calendar the expiration date at signing, and set reminders at 12, 6, and 3 months before.
The mid-sized business with a personnel change
The office manager who signed the contract left the company. Their replacement didn't know about the pending expiration. The renewal notice arrived at the departing manager's still-active email, sat unread, and the transition happened.
Prevention: assign renewal responsibility to a role rather than an individual, and document handoffs when personnel change.
The multi-site operator with scattered contracts
A retail chain has 20 stores across multiple TDSP territories, with contracts staggered across different suppliers and expiration dates. Some contracts expire without renewal because the operations team can't keep track. Others get renewed at whatever the incumbent quotes, without any competitive shop.
Prevention: portfolio-level procurement management, with a single tracking system for all account expirations and a scheduled cadence for RFPs.
The busy business that keeps deprioritizing
The renewal notice arrives, the owner sees it, thinks "I need to deal with that," and doesn't. Weeks pass. Days pass. The expiration date arrives with nothing done.
Prevention: block a specific calendar day for the renewal decision as soon as the notice arrives, and treat it like any other financial deadline.
The common thread across these scenarios: none of them involve malicious behavior by the REP or the customer failing to understand the contract. They all involve normal business distraction and the absence of a proactive process.
Holdover Rates by REP
Different Texas REPs price holdover rates differently. Without publishing specific comparisons (which would go stale quickly and could inaccurately represent a specific REP's current pricing), the general patterns:
Large, established REPs (TXU, Reliant, Direct Energy, and others) typically apply holdover rates that are aggressive but formulaic. They often disclose the holdover formula in the original contract's terms.
Smaller specialized REPs may or may not have published holdover terms; some are more transparent than others.
Broker-affiliated REPs may pass through commission-related structures in their holdover pricing that don't apply to the original contract.
Regardless of which REP you're with, the applicable holdover rate for your specific contract is determined by that contract's post-expiration provisions. Read yours. If you can't find the contract, request a copy from the REP.
For a general overview of REPs serving Texas commercial customers, our Texas electricity providers directory covers active suppliers and their profiles.
Frequently Asked Questions
What is a holdover rate on Texas commercial electricity?
A holdover rate is the pricing a REP applies after a fixed-term commercial electricity contract expires without a new contract in place. It's usually a variable, market-linked rate priced substantially higher than the expired fixed rate. Typical holdover rates run 1.5 to 3 times the expired rate, with occasional spikes higher during volatile market conditions.
How much are holdover rates in Texas?
Specific rates vary by REP, contract terms, and current market conditions. As a general pattern, Texas commercial holdover rates commonly run 2 to 3 times the expired fixed rate. A business that had been paying 8¢/kWh under a fixed contract could see holdover pricing of 16 to 24¢/kWh or higher. Verify your specific contract's post-expiration provisions.
What is a month-to-month commercial electricity rate?
A month-to-month (MTM) rate is a pricing arrangement with no term commitment where the REP bills monthly at a variable, market-linked rate. It typically applies after a fixed contract expires (as a holdover rate) or as an option for customers who don't want to commit to a term. MTM rates are almost always higher than comparable fixed-term contracts because the REP faces greater hedging risk and priced accordingly.
Are holdover rates higher than fixed rates?
Yes, substantially. Holdover rates are typically 2 to 3 times the expired fixed rate, and can be even higher during volatile market conditions. This is by design: REPs price holdover pricing to encourage customers to sign a new contract or leave, rather than remain on month-to-month service indefinitely.
What happens when my commercial electricity contract expires in Texas?
Several outcomes are possible depending on your contract terms:
- If your contract has an auto-renewal clause, you may be automatically enrolled in a new fixed-term contract at whatever rate the REP designates.
- If your contract has a month-to-month provision, you transition to a variable holdover rate with no new term commitment.
- If you signed a new contract before expiration, that contract takes effect on your specified start date.
- If you switched to a new REP before expiration, service transitions at expiration.
Read your contract's specific post-expiration provisions to know which outcome applies.
How do I avoid a holdover rate?
Start the renewal process 90 days or more before contract expiration. Track your expiration date at signing. Solicit competitive quotes 60 to 90 days before expiration. Sign a new contract (with your current REP or a new one) with a start date that aligns with your current contract's end date. Don't rely on the REP's renewal notice as your only reminder; renewal notices sometimes reach outdated email addresses or people no longer with your company.
What is a rollover clause in a commercial electricity contract?
A rollover clause is a provision that automatically rolls the customer into a new contract term or pricing arrangement at the end of the original term. Depending on the specific language, this may mean:
- An auto-renewal into a new fixed-term contract at the REP's designated rate
- A rollover into month-to-month pricing
- A transition to a "market rate" determined by a specified formula
Read the specific rollover language in your contract to know what will happen.
Can my REP put me on a higher rate without notice?
Reputable REPs are required to provide notice before your contract expires. However, notices sometimes reach outdated contact information, or the transition to holdover pricing occurs as a normal contractual outcome even when notice was properly delivered. If you believe you were transitioned to a holdover rate without proper notice, contact the PUCT Customer Protection Division at 1-888-782-8477.
How do I get off a holdover rate?
For most true month-to-month holdover situations, you can switch to a new REP with the standard 30-day notice period. Get competitive quotes, sign a new contract, and initiate the switch. If you're locked into an auto-renewed term with an early termination fee, calculate whether paying the ETF and switching still saves money over remaining on the term (often it does for larger accounts).
What is POR (Price on Renewal)?
POR (Price on Renewal) is a specific contract clause where the customer automatically renews at a new rate the REP sets at the time of renewal. Distinct from month-to-month holdover in that POR is technically a new contract (usually 12 months), though at unfavorable terms if the REP sets the renewal rate aggressively. POR clauses typically require active opt-out to prevent renewal.
Do all Texas commercial contracts have holdover provisions?
Effectively yes, because service can't just stop when a contract ends without either the customer switching to a new supplier or losing service entirely. What varies is the specific pricing that applies during the post-expiration period. Every Texas commercial contract should specify what happens at expiration; if yours doesn't, ask your REP for clarification in writing before the contract ends.
Can I negotiate a lower holdover rate?
Sometimes, especially for larger commercial accounts. If you're on a holdover rate and your REP knows you're actively shopping to leave, they may offer a rescued fixed rate to keep you as a customer. This offer will still be at higher rates than you would have negotiated three months ago, but much better than continuing on holdover. Be prepared to actually leave if the offer isn't competitive.
How long does the switch process take after I sign a new contract?
Standard switching in Texas takes approximately 30 days from the date the new REP submits the switch request to ERCOT. If you're on a holdover rate now and want off, count on at least 30 days of continued exposure while the switch processes. Some REPs can facilitate expedited switches in specific circumstances, but 30 days is the norm.
What if I don't want to sign a new contract but need to get off holdover?
Every retail electricity customer in Texas must have a contract with a REP. If you don't want a fixed-term contract, you can shop for the least-expensive month-to-month product offered by any REP. This is typically still less costly than staying on your current REP's holdover rate, but it will be higher than a comparable fixed-term contract.
Does the PUCT regulate holdover rates?
The PUCT regulates disclosure and notice requirements for Texas retail electricity contracts, including provisions related to contract expiration and renewal. However, the PUCT does not directly cap holdover rates on commercial contracts. Commercial accounts are treated as arms-length business transactions where the parties negotiated the contract terms. The PUCT's regulatory focus is heavier on residential protections. That said, if a REP fails to comply with disclosure or notice requirements, or applies pricing not authorized by the contract, the PUCT Customer Protection Division at 1-888-782-8477 can take up complaints.
Where to go from Here
If you're worried about your contract expiring or already on a holdover rate:
- Confirm your contract expiration date. Pull your signed contract and identify the exact end date. If you can't find your contract, request a copy from your REP.
- Read the post-expiration provisions. Determine whether your contract has an auto-renewal clause, a month-to-month clause, or another mechanism. Know what will happen (or already happened) on the expiration date.
- If your contract expires within 90 days, start shopping immediately. Request quotes from multiple REPs, or engage a supplier-neutral energy consultant to run a competitive process.
- If you're already on holdover pricing, take action within 24 to 48 hours. Contact your REP about rescue pricing, initiate a competitive shop, and sign a new contract to switch as soon as possible.
- Set up expiration monitoring for the next cycle. Calendar reminders at 12 months, 6 months, and 3 months before the next expiration. Assign responsibility to a role, not just an individual.
Electric Decisions works with Texas commercial buyers on supplier-neutral renewal procurement, holdover rescue, and long-term expiration management. We do not sell electricity. Our documented 5-step energy procurement process for Texas commercial buyers applies whether you're 90 days from expiration or already on holdover pricing and need to move quickly.
For related reading, our overview of when to renew your Texas commercial electricity contract covers the full timing framework from initial expiration awareness through contract execution. Our commercial electricity comparison for Texas businesses benchmarks new contract quotes against the live ERCOT forward curve so you're comparing apples to apples across bidders. And our commercial electricity bill audit guide covers how to verify that your new contract, once signed, is being billed correctly.
A single missed renewal notice can cost a Texas commercial business tens of thousands of dollars over the following year. It is one of the most avoidable expenses in commercial electricity, and the solution is simple: start early, track expiration dates, and treat renewal as a scheduled procurement process rather than a reactive administrative task.