Moving to Texas? Take advantage of the state’s retail electricity market
Fewer than 20 U.S. states have opted to ditch the old, state-controlled energy model in favor of a competitive energy marketplace. Since 2002, the Lone Star State has been one of them. Whether you’re just moving to Texas, or a born-and-bred Texan interested in shopping around for electricity, you will get a better rate and a better plan by comparing the fine print of Retail Electricity Providers (REP).
According to the Public Utility Commission’s 2019 report, electricity rates in Texas are below the national average — about 10 cents per kWh versus 13 cents. (Per kWh? Kilowatt hour is the amount of energy a 1,000 watt appliance like a dishwasher would use running for an hour.)
The report also points to consumers’ breadth of plan options: There are plans with free use periods (weekends or evenings), prepaid plans, short-term and long-term contracts (one month to 60 months), and a host of renewable energy options. About 25% of Texas electricity plans are green plans, which “solely support electricity generated from 100% renewable sources.”
To take advantage of this dynamic electricity marketplace, start by considering your energy use, payment preferences, and environmental priorities. Then compare key points in the fine print of your available plans to find your best Texas electricity company.
How to shop for electricity in Texas
Find your average energy use
Electricity is charged per kilowatt hour, but that per kWh rate depends on your usage. When browsing energy plans, you’ll find rates quoted for 500, 1,000, and 2,000 kWh per month. The average household uses about 1,000 kWh, and that’s the usage amount that typically gets the best rates. If you’re a light or heavy energy user, you’ll pay more per kWh with most plans.
To find how much energy you use, average together your past kWh usage from both winter and summer months. Then seek out plans with fair rates for your usage tier.
While your per kWh rate hinges on use, there are flat fees to watch out for. In general, we’d advise against plans that charge minimum usage fees. The average American household uses 867 kWh per month, according to U.S. Energy Information data, which means it’s not difficult to fall short of common minimum-use thresholds of 800 – 1,000 kWh per month.
Choose your plan type
Electricity rates come in three varieties.
- Fixed-rate: A slightly higher rate allows you to lock in today’s energy costs for the duration of your contract. Fixed rate plans usually have long terms — one to three years.
- Variable-rate: The energy market is fickle — equally vulnerable to market conditions and weather conditions. With a variable rate, you’ll experience all the same fluctuations as your provider, benefiting from low rates during favorable conditions and paying high rates when demand exceeds supply.
- Indexed or Market rate: Similar to variable-rate, the index or market rate tracks to a publicly available pricing formula.
Renewable energy is the main thrust of the energy market’s interest in diversification and competition. You can find REP electricity plans up to 100% renewable, backed by some combination of wind and solar power. These plans typically (but not always) cost more than their fossil fuel counterparts, but your payments directly fund a cleaner energy future. Now, the electricity running your home comes from the same combination of sources as your neighbors, no matter what plan you choose. But with a green plan, your payments serve as renewable energy credits. You are paying for more wind- and sun-powered energy to be behind all electricity generated.
Arthur Murray, an energy specialist with Choose Energy, points out that not all green electricity plans are created equal.
“All green energy is renewable, but all renewable energy is not green. Burning biomass, for example, is considered renewable, but it is by no means carbon neutral. So consumers who wish to reduce their carbon footprints by purchasing green energy plans must know what they’re buying.”
Managing Editor, Choose Energy
Read the label
To find out how much sugar is in your breakfast cereal, you check the nutritional facts. To find out what you’re paying for electricity, and to who, you check the Electricity Facts Label (EFL). Don’t rely on the large-font promotional pricing to tell you everything you need to know about plans. Available fees and discounts are two of the most important line items on an EFL, but primarily the Electricity Facts Label lists two categories of charges: utility provider determined and energy company determined.
- Utility Provider Determined: Transmission and Distribution Utility (TDU) Charges come from the company that owns and services the power lines in your area. They levy delivery charges per kWh and per month, so this amount will fluctuate with every bill.
- Energy Company Determined: This portion of the EFL includes information about what your retail electricity provider charges, including Base charges, per kWh Energy Charges, and Fees, such as minimum usage and cancellation.
What you should know about deregulated electricity in Texas
In deregulated areas, you have to shop
While other deregulated states still have consumers default to their utility company as their energy supplier, the deregulated portions of Texas (the majority of the state) require you select a retail electricity provider.
“In Texas, residents of deregulated areas must choose a retail electric provider rather than a traditional utility; in other deregulated states, customers may stay with their utility.”
Managing Editor, Choose Energy
There’s a governing body
In Texas, 85% of the electric grid is controlled by the Electric Reliability Council of Texas (ERCOT). A nonprofit, ERCOT is overseen by Public Utility Commission of Texas and the Texas Legislature. It sets the market rules, checks for provider compliance, and administers Renewable Energy Credits, among other duties.
The tango between supply and demand can cause dramatic changes in the per kWh rate of electricity in Texas. With the closure of three coal plants and the construction delay of renewable energy plants, the past year has seen plenty of pricing fluctuation. Because summer in Texas means about 9 million AC systems running at full blast, the hotter months tend to come with increased electricity rates. If you’re concerned about price hikes, consider opting for a fixed-rate, long-term electricity plan.
You can shop for your power provider, but not for your power lines
While about 85% of Texans are able to shop around for their power providers, no one gets to shop around for the company that services the power lines. Your Transmission and Distribution Service Provider (TDSP) is determined by location. Their delivery fees will alter the advertised price of electricity plans. The service areas of Texas TDSPs are listed below. For more information, and links to service area maps, check out CenterPoint Energy’s guide.
- CenterPoint Energy: Angleton, Alvin, Cypress , Galveston, Houston, Pasadena and Richmond
- Oncor: Addison, Corsicana, Chandler, Dallas, Denison, Denton, Diboll, Fort Worth, Midland, Odessa, Palestine, Paris, Plano, Tyler and Wichita Falls
- AEP North: Abilene, Alpine, San Angelo and Vernon
- AEP Central: Corpus Christi, Laredo, McAllen, San Benito and Victoria
- TNMP (Texas-New Mexico Power): Angleton, Brazoria, West Columbia, Sweeny, Alvin, Friendswood, Dickinson, League City, La Marque, Texas City, Detroit, Bogata, Emory, Whitewright, Leonard, Farmersville, Pilot Point, Princeton, Lewisville, Nocona, Petrolia, Olney, Bryson, Strawn, Glen Rose, Hico, Hamilton, Meridian, Clifton, Whitney, Valley Mills, Gatesville, Kermit, Pecos, Fort Stockton and Sanderson
- Sharyland Utilities: Brady, Celeste, Colorado City, Mission/McAllen and Stanton
The Bottom Line
A deregulated energy market is intended to promote competition, keeping prices low and innovation high. In Texas, it’s working. Electricity costs are below the nationwide average for residential, commercial, and industrial customers, having experienced a ten-year decline in price. And the state is leading the country in renewable energy use: According to Murray, Texas “produces the most green energy of any state – particularly because of its leadership in wind energy. It produces nearly three times as much as the next state.”