Electricity rates in Texas

The Texas State Legislature opened up the state’s electricity market to competition that allows Texans the choice of their electricity supplier. Choose from more than 125 electricity suppliers in the Lone Star State, each offering opportunities for the lowest kilowatt-hour rates and a variety of energy plans to compare.

Find the best electricity rates in Texas

See the lowest rates available today for your location on the deregulated energy market.

Key players in the Texas energy market

Energy in the Lone Star State is delivered through a complex system of utilities, TDUs, co-ops and REPs that work together to get electricity from power plants to your front door.

Electric Reliability Council of Texas (ERCOT)

ERCOT is a nonprofit that manages Texas’s electricity grid, called the Texas Interconnection. It’s the electric power grid operator for 90% of the state — serving some 26 million customers. Overseen by the Texas Legislature, its members include residential customers, co-ops, retail electric providers and transmission and distribution utilities.

Public Utility Commission of Texas (PUCT)

PUCT is a state agency that regulates many of the utilities offered to Texans, including electricity. Managing ERCOT, it’s involved in how electricity is generated, supplied and delivered to homes and businesses in the state. It also mediates issues among customers, utility companies and retail electricity providers — or REPs.

Transmission and distribution utilities (TDUs)

Electric utilities generate and deliver the electricity that powers homes and businesses. Each of the TDUs in Texas covers a specific territory.

Electric cooperatives

Established in 1941, Texas Electric Cooperatives today represents more than 75 electric cooperatives that deliver electricity to the homes of more than 3 million members statewide. It lobbies for the interests of co-ops and manages utility supplies and services.

Retail electricity providers (REPs)

More than 125 REPs in Texas buy electricity wholesale and transmit and deliver it to homes and businesses in the state, among them:

Alternative energy companies

Most REPs in Texas offer renewable or clean energy plans that come from natural sources or replenished processes, like wind, hydro or solar energy.

How to find the cheapest electricity rate in Texas

Finding the lowest electricity rates in Texas requires comparing retail electric providers and energy plans to find the best fit to power your home or business. But first, you’ll want to know your average electricity use.

1. Calculate your current energy use. Look at two or three of your most recent energy bills and average out your use by energy unit — per kilowatt-hour (kWh) for electricity. This information will help you shop for similar or cheaper rates on the market.
2. Shop by ZIP code on an energy marketplace. Marketplaces like EnergyBot can help you compare rates and energy plans specific to your residence with your ZIP code and information about your home.
3. Compare energy providers and plans. Weigh kWh rates, contract terms and potential for savings to narrow down the best provider for your needs.

What is Power to Choose?

Power to Choose is the state-operated energy shopping website managed by the Public Utility Commission of Texas. While it’s advertised as an easy way to compare plans, customers online complain that providers hide actual rates behind misleading listings and confusing math to entice signups.

Deregulated cities in Texas

The big state of Texas is home to a handful of big cities to match — each with a healthy deregulated market.

• Dallas. Chariot Energy offers 100% renewable energy plans to residents of the DFT metro area.
• Fort Worth. Clean, renewable energy is supported by huge and local solar and wind farms supported by Chariot Energy.
• Houston. Houston is the largest deregulated electricity market in Texas, with energy delivered through CenterPoint. Nearly 2 million homes and businesses have deregulated meters.
• Midland. Oncor offers many energy plans for electric power, including solar renewable energy certificates — or SCRECs — through green energy plans.

Cities without customer choice

Areas in which co-ops operate do not offer electric choice, including cities like:

• Austin
• San Antonio
• El Paso
• Lubbock

How to compare electricity plans

You have many independent electricity suppliers to choose from in Texas, each offering different rates and energy plans. Factors to weigh when researching your options come down to rates and the type of plan that fits your electricity needs and budget.

Fixed, variable and hybrid rates

Providers in Texas offer the choice of fixed, variable or hybrid kWh rates:

• Fixed rates. Fixed rates allow you to lock in a rate for an established contract term. These plans protect your budget from surprise rate spikes, though they can keep you from more easily switching providers with lower rates if the market dips.
• Variable rates. Variable rates allow you to purchase energy without a contract. These plans give you the flexibility to jump to a different provider at any point, though you can expect to pay increased rates when demand is high, such as during colder weather months.
• Hybrid rates. Fixed and floating options split your contract into a fixed rate for part of your term and a variable rate for another.

For variable rates, ask your potential provider if it limits how much rates can fluctuate, which can help you keep costs manageable.

Introductory rates and signup bonuses

Many suppliers and providers offer lower advertised rates or bonuses to entice new customers. These bonuses can be reflected as a lump-sum savings or percentage knocked off the standard rate.

Introductory rates can last the first quarter of your contract, for six months or even the full term. Read the fine print of any offer to understand the rate you’ll pay after the bonus and avoid overpaying for your energy in the long term.

Contract terms and details

Understand the contract system of any supplier you’re interested in. Look at available terms, how the supplier handles renewals and whether you can cancel before your contract ends.

• Contract terms. Contracts can range from three months to a year or more. Longer terms can be easier to manage, while shorter terms allow the flexibility to leverage market dips.
• Contract renewal. Some providers require you to renew a contract term, allowing you to review or change the details of your rate schedule, while others automatically renew your terms unless you tell them not to.
• Contract cancellation. Markets what they are, you may find lower rates so enticing, you’re willing to pay a termination fee to end your contract early. Understand the penalties you face so that you can factor them into any future decisions to switch providers.
• Late fees and grace periods. Ask potential providers about late fees and how many days after the due date you can make a payment without paying a penalty.

Costs and fees to expect in Texas

Your electricity bills include home energy costs that can vary by utility provider or supplier.

• Unit or consumption charges. Energy costs are expressed as kilowatt-hours (kWh) for electricity and therms for natural gas, with variances among residential, commercial and industrial customers.
• Delivery and transmission costs. This is the cost a utility company charges to cover moving energy from power plants, across power lines and pipelines and to your meter.
• Capacity or demand fee. Some electric companies charge a fee to cover the cost of ensuring enough electricity or gas when demand peaks.
• Ratchet charges. Also related to demand, these are periodic fees charged by utilities to recoup costs related to surges in use.
• Taxes. Most suppliers include tax costs in pricing schedules. Ask your supplier about taxes if you don’t see them clearly listed in your bill.
• Other costs and fees. Some states and local governments charge fees that fund public policy programs related to such causes as energy conservation or support for vulnerable communities.

If you choose an alternative energy option, your energy bill may include fees associated with the renewables you choose.

How to switch electricity suppliers in Texas

After you’ve found an electricity provider that fits your energy needs, gather up a current monthly bill and get ready for the big switch.

• Call your new energy supplier. Confirm the details of your energy plan and ask any remaining questions. You may need to provide information from your current utility provider to transfer your account. Ask how long you can expect to wait until it’s completed.
• Call your old provider. Your new supplier will notify your old supplier, but it’s helpful to confirm the process directly with your current company.
• Review your first bill. Make sure the details of your new bill match your contract or agreement, and flag any issues as soon as possible for a fix.

Texas law allows you to take on a new contract without an early termination fee if you switch within 14 days before your old contract’s expiration date.

Benefits of deregulation in Texas

Energy suppliers in the Lone Star State highlight the financial benefits of electricity choice, further advertising the benefits to the environment through renewable energy.

• Competitive rates. In theory, deregulation requires suppliers to compete for your business, motivating quality service and keeping prices lower than regulated rates over time.
• Flexibility of suppliers. Unlike the regulated market that chooses suppliers for you, the deregulated market allows you to customize suppliers and rates for control over how you power your home.
• Access to alternative energy. Deregulation has allowed alternative energy suppliers to compete on the market, offering 100% renewable options to consumers

What to look out for in Texas

Results of deregulation are mixed, and there’s research to suggest that doesn’t lead to the savings it promises over the regulated market. There’s also the potential for suppliers to lure customers into plans without transparency around the risks.

• Elusive rates on Power to Choose. The state-run marketplace was designed for transparency, but customers say it’s rife with hidden rates and inconsistent comparisons that oversimplify the shopping process, trapping customers into high-cost contracts.
• Shaky supply security. If generators aren’t able to meet demand, the system can collapse. These situations are rare but possible: In 2021, the Texas power grid failed due to unexpected extreme weather, resulting in an energy crisis that left more than 10 million people without heat — and electricity suppliers pointing fingers.
• Potential for scams. A confusing deregulated market has resulted in unscrupulous suppliers targeting the elderly, low-income households and other vulnerable communities with aggressive calls to switch utility companies and promises to save money.

Texas energy deregulation in the news

Senate Bill 7 became law in 1999, calling for the “establishment of a fully competitive electric power industry.” That green light resulted in full deregulation of Texas’s electricity market by January 2022, becoming the only state with its own stand-alone electricity grid.

But reorganizing how homes and businesses are powered hasn’t been easy for the second-largest state in the union.

Enron scandal

It’s hard to talk about Texas and electricity without name-checking Enron. The energy company was an influential part of the state’s early conversations to deregulate the energy market.

Ultimately, Enron was subject to the very competition that deregulation promised, and the company began relying on opaque accounting to hide significant drops in revenue. Those dubious business practices became public in early 2001, and the outrage pushed Enron to file for bankruptcy in December 2001 — the largest Chapter 11 case in the history of the US. The scandal left 4,000 employees without jobs and retirement.

2001 Texas power crisis

Texas was hit with three severe storms in February 2001 that triggered a deep freeze and the failure of the state’s energy infrastructure, leaving 4.5 million homes — an estimated 10 million people — without heat and power. Experts are trying to break down what happened even a year later, though some have blamed the crisis on a chaotic deregulated market in which there isn’t one agency or company that owns how electricity and natural gas is generated, transmitted or distributed.

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Kelly Suzan Waggoner

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Kelly Suzan Waggoner is editor-in-chief at Finder, where she works with a talented team of expert writers and editors focused on helping readers to save money, earn money and grow their wealth. She joined Finder in 2016 as an editor, germinating the site from money transfers to include the wide scope of personal finance. Kelly has worked with publishers, magazines and nonprofits throughout New York City to develop best practices around editorial, SEO, plain language and accessibility, including Black Dog & Leventhal Publishers, HauteLife Press and Queerty. She is quoted on such sites as Lifehacker and CertifiKid, and ghostwrote Copyediting and Proofreading for Dummies, published by Wiley. Kelly earned a BA in English from Russell Sage College and a Poynter ACES Certificate in Editing from Poynter News University. She is trained in digital and website accessibility and plain language, and is a member of ACES: The Society for Editing and the Center for Plain Language. Between projects, she toys with words, flips through style guides and fantasizes about the serial comma’s world domination.

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