Prepaid vs Traditional Lights in Texas

The $955 question

Prepaid costs about $955 more per year than traditional plans. For some people, that's worth it. For others, it's money they can't afford to lose. Here's how to know which one you are.

The Quick Answer

Choose Prepaid If:

- You cannot pay a $200-400 deposit right now
- You have credit challenges
- You need power connected quickly
- You want flexibility with no contract

Choose Traditional If:

- You have good credit or can pay a deposit
- You want the lowest possible rates
- You plan to stay 12+ months
- You do not want to monitor your balance

Want traditional rates without the big deposit?

Traditional plans save you $80-100/month compared to prepaid ($960-1,200/year). We check multiple light companies to see if you qualify for $0 deposit on a traditional plan. Many people with credit challenges find at least one option. Can't promise it'll work, but it's worth checking before locking into prepaid. And if traditional doesn't work? Prepaid is always there.

Side-by-Side Comparison

Feature	Prepaid	Traditional
Upfront Cost	$40-75 (goes toward usage)	$0-500 (deposit, depends on credit)
Energy Rate	12-20¢/unit (30-50% higher)	8-12¢/unit (market competitive)
Credit Check	No	Yes (soft pull)
Contract Length	No contract	Month-to-month or 6-36 months
Early Termination Fee	$0	$50-200 (if on contract)
Billing	Daily (pay before use)	Monthly (pay after use)
Disconnection Risk	Same day if balance hits $0	After 2+ missed payments
Usage Awareness	High (daily tracking)	Low (monthly bill)
Best For	Short-term, credit challenges, flexibility	Long-term, budget planning, lowest cost

The True Cost Over Time

Let us look at what you would actually pay over 12 months for a typical Texas home using 1,000 units/month:

Prepaid Plan

Startup cost: $50

Energy (15 cents x 1,000 units x 12 mo): $1,800

Daily fees ($1/day x 365): $365

12-Month Total: $2,215

No deposit required. Cancel anytime.

Traditional Plan

Deposit (refunded after 12 mo per PUCT 25.24): $300*

Energy (10 cents x 1,000 units x 12 mo): $1,200

Monthly fees ($5/mo x 12): $60

12-Month Total: $1,260

*Deposit refunded, so net cost is $1,260.

The Bottom Line

In this example, prepaid costs $955 more per year ($80/month more). The $955/year difference is the real cost of avoiding a deposit. For some situations, that trade-off makes sense. For others, it does not.

Related: Texas Summer Rates 2026 — what to expect this summer.

Who Should Choose Prepaid?

People Rebuilding Credit

If you are actively working to improve your credit and cannot access good rates yet, prepaid keeps the lights on while you rebuild. Think of it as a bridge, not a destination.

Short-Term Residents

Staying somewhere for just a few months? Prepaid's no-contract flexibility means you can leave without early termination fees. No deposit to wait to get back.

Budget-Conscious Users

Daily balance tracking helps some people manage usage better than monthly bills. If you have struggled with surprise bills, prepaid forces awareness.

People Who Need Power Now

Prepaid can be set up same-day in most cases. If you cannot wait for credit checks and deposit processing, prepaid gets you connected fast.

Who Should Avoid Prepaid?

People with Good Credit

If you can qualify for no-deposit traditional plans, you are paying 30-50% more for no reason. Check your options first.

Long-Term Residents

Planning to stay 2+ years? The extra cost of prepaid adds up significantly. Even with a deposit, traditional plans save money long-term.

High-Usage Households

If you use 2,000+ units/month (large home, electric heating/cooling), the rate difference between prepaid and traditional becomes very expensive.

People Who Forget to Pay

Prepaid requires active balance monitoring. If you often forget bills or travel frequently, you risk disconnection. Traditional plans offer more grace period.

Frequently Asked Questions

Are prepaid lights more expensive than traditional?

Yes, prepaid light rates are typically 30-50% higher than traditional plans. For example, if traditional plans charge 10 cents per unit, prepaid plans might charge 13-15 cents. However, prepaid eliminates the $200-400 upfront deposit that traditional plans often require.

Can I switch from prepaid to traditional lights?

Yes, you can switch anytime. Prepaid plans have no contracts or early termination fees. Once you are ready for a traditional plan (perhaps after improving your credit or saving for a deposit), you can simply stop adding funds to your prepaid account and get started with a traditional light company.

Do prepaid plans affect my credit score?

No, prepaid light companies do not run credit checks, so signing up will not affect your score. However, they also do not report positive payment history. Traditional plans may report to credit bureaus, which can help build credit if you pay on time.

Which type of plan is better for renters?

Prepaid makes sense for short-term rentals (under 6 months) or if you are unsure how long you will stay. Traditional plans save $80/month ($960/year), which means they pay for themselves after 3-4 months even with a $300 deposit. For longer stays (12+ months), traditional plans save significant money.

What happens if I run out of money on prepaid lights?

Your power will be disconnected when your balance reaches zero. Most light companies send low-balance alerts via text or email. To restore service, simply add more funds to your account. Service is typically restored within a few hours.

Do traditional plans always require deposits?

Not always. If you have good credit (typically 650+), many traditional light companies will waive the deposit. You can also avoid deposits by providing a letter of credit from a previous utility or using deposit waiver programs.

This guide is for informational purposes only and does not constitute legal or financial advice. For official rules, visit the Public Utility Commission of Texas. NoDepositLights.com is powered by Compare Power (PUCT License BR190020).

Prepaid vs Traditional Lights