If you live in those parts of Texas with a deregulated energy market, shopping for an electricity provider among the hundreds of companies and plans probably seems normal. If you are new to this Texas electric shopping experience, you’re likely very confused.
In deregulated Texas, the task of choosing a plan or provider is not as simple as calling your utility to turn the power on. There are more than 130 retail electric providers in the state, according to the Public Utilities Commission of Texas. Each of those providers can have dozens of plan options.
The Texas energy choice market is unique in that it brings strong competition and what some experts say are lower prices, a wide variety of plans and unique billing options. But it’s easy to get lost. Choosing the wrong electric plan could mean an unexpectedly high bill.
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The US has 18 states with deregulated electricity markets — where consumers have energy choices. But the Texas deregulated electricity market is “a poster child for a fully restructured electricity sector,” and “this system on steroids” has the most provider and plan options of all the US states, Joshua Basseches, an assistant professor of public policy and environmental studies at Tulane University, told CNET.
The wide variety means the choice goes far beyond picking a company to provide your electricity. “I think the biggest advantage in Texas is you can find some fairly exotic price structures that you just would not have found pre-restructuring [pre-deregulation],” said Ramteen Sioshansi, professor of engineering and public policy as well as electrical and computer engineering at Carnegie Mellon University.
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Here’s what Texas movers and switchers need to know about shopping for the best electricity provider, how to compare the best electricity plans, what to look for in a plan, and pitfalls to avoid.
*All rates above are for the Oncor utility area (ZIP code 75001) and accurate as of Feb. 2, 2024. For the most up-to-date rates in your area, please enter your ZIP code at ChooseEnergy.com. Like CNET, Choose Energy is owned by Red Ventures.
Deregulation in Texas: What does that mean?
Before deregulation took place in Texas in 2002, most electricity service was provided by what Sioshansi calls vertically integrated utilities — the utilities that owned the generation facilities also owned the high voltage transmission lines that bring electricity to your home. After restructuring, legislators separated the generation function from transmission and distribution. The separation left the transmission and distribution system alone but opened up the generation portion to competition, he said.
“Different companies that own generators compete with each other, and whoever can supply electricity at the lowest cost is who is going to supply [it] to the end customer,” said Sioshansi.
The main difference between Texas’ retail energy market and other restructured states is how competition exists at both the wholesale and retail levels, he said. Most other energy choice states only have competition at the wholesale level.
Sioshansi believes competition provides some downward pressure for companies to operate and supply energy at the lowest cost possible, and as a result Texas has seen a very high switch rate. “As a residential customer, you can shop online and you can find lots of different retail suppliers. And you can switch to them.”
Overseen by the Public Utility Commission of Texas, the nonprofit system operator is called ERCOT, or the Electric Reliability Council of Texas, and it serves 90% of the Texas grid. The role of ERCOT is to manage the wholesale energy electric market, the transmission infrastructure and long-term capacity planning. ERCOT provides a balance between supply and demand, said Sioshansi. “If it sees that a generator wants to inject energy that would overload the transmission system, ERCOT basically has the authority to make adjustments to ensure that transmission lines are not overloaded,” he said. ERCOT also plays a role in forecasting how much infrastructure is needed to meet anticipated capacity.
The advantage of Texas having its own grid system like ERCOT is that it can operate outside of federal jurisdiction. State legislators pushed to keep the Federal Energy Regulatory Commission out of Texas so its energy market can operate with state-only oversight, said Sioshansi. “What the state and the federal-level regulators want to do sometimes are in conflict with one another. You don’t have this in Texas, because essentially, all of the regulatory oversight is at the state level,” said Sioshansi. Essentially, Texas prefers to operate on its own and without FERC intervention, which has helped fuel its restructured energy economy, explained Sioshansi.
What’s the difference between the distribution utility and a retailer ?
Even though Texas is a restructured or deregulated state, it doesn’t mean you can change your utility. Where your energy choice comes into play is with the supplier or retailer — the energy company that owns the electricity and sells it to the utility or you directly.
Your utility company or transmission distribution utility owns the transmission and distribution of the electricity — the meters, wires, poles, cables that transmit the electricity to your home. You call your TDU if there is a power outage, if a tree takes down an electric line, or there is a problem with your meter. “That’s whoever actually owns the wires and cables that […] move the electricity around,” Sioshansi said.
Retailer or supplier
The two terms are used interchangeably in Texas, but the retailer or supplier owns the electricity as a commodity, sometimes buying it from a generation source such as solar, wind, hydro, nuclear or fossil fuel plants.
“We think of it [retailers] as essentially being a middleman to some extent,” Sioshansi said. Electricity retailers buy the electricity wholesale and resell it to you as the customer, he said.
It is the retailer or supplier where you, the consumer, have a choice. If you want to switch to a better price per kilowatt-hour or if you are interested in a renewable energy plan, you can shop for a new retailer or supplier.
Not all of Texas is restructured with energy choice, though. It all depends on what utility area you live in.
“An investor-owned utility is a publicly traded company beholden to their shareholders,” said Sioshansi.
If you live in an area served by one of these investor-owned utilities you will have energy choice:
- Texas-New Mexico Power Company
- AEP Texas North
- AEP Texas Central
- Centerpoint Energy
- El Paso Electric Co.
- Entergy Texas
- Southwestern Electric Power
- Xcel Energy
Municipally owned utilities
Municipal utilities are owned and operated by the city and are not energy choice markets. If you live in Austin Energy’s service area, for example, you can only buy your electricity from this utility and do not have a choice in providers.
- Austin Energy
- Bastrop Electric Dept.
- Bryan Texas Utilities
- College Station Utilities
- CPS Energy
- Denton Municipal Utilities
- Lubbock Power & Light
- New Braunfels Utilities
One exception on the municipality list is Lubbock Power and Light, which is expected to transition to ERCOT and into a competitive deregulated energy market sometime in 2024.
Electric cooperatives are essentially owned and operated by the customers they serve. “It’s not beholden to shareholders. It’s more beholden to the customers who formed the cooperative utility,” said Sioshansi. Cooperatives, or co-ops, often have a board of directors voted in by members.
You can find the full list here of Texas cooperatives here.
What types of electricity plans are offered in Texas?
Here are the most common types of electric plans offered in Texas’ energy choice marketplace.
Fixed-rate electric plans
Fixed-rate electricity plans offer a locked-in supply price for a set period of time, even while electric prices are rising or falling. In general, most plans will secure your rate for 12 to 36 months. The benefit to a fixed-rate plan is a predictable bill and protection from fluctuating electric prices. The drawback to a fixed-rate plan is if electric rates decrease below your locked-in fixed rate, you still pay the higher, agreed upon rate until your plan expires. Your energy consumption is the only variable in your monthly electric bill. Your rate per kWh is fixed. Fixed-rate plans are good for people seeking predictability and cost control.
Variable-rate electric plans
You can choose a variable rate plan in deregulated Texas, where the rate per kWh you pay tracks with the market costs of electricity. As market conditions for electricity rise and fall, so will your rate. The benefit to a variable rate plan is you can take advantage of lower rates if they occur.
Another reason people choose variable rate plans is due to their loose contract agreements. Variable rate plans typically don’t come with a locked-in contract length — meaning you can drop the plan without penalty at any time.
Don’t let moving be the reason you go with a variable plan, though. According to the Texas PUC regulations, “A contract is limited to service to a customer at a location specified in the contract. If the customer moves from the location, the customer is under no obligation to continue the contract at another location.”
Before enrolling in any plan it’s a good practice to ask your potential provider about any penalties or fees for exiting early.
Prepaid electric plans
Also known as a “no-deposit plan” option, prepaid electricity is what it sounds like. Paying for your electricity in advance. There are many reasons why you may want this type of plan, the most common being to avoid paying a high deposit.
Most Texas electric retailers do some form of credit verification to determine if a deposit is needed before enrolling a customer. With prepaid electric service, you can skip the credit verification and go straight to a prepaid plan or opt for prepaid after learning you owe a deposit. Either way, a prepaid plan allows you to turn your lights on at no risk to the retailer, since you’re paying for the electricity upfront.
The biggest drawback to prepaid electric plans is the rate per kilowatt-hour can be more expensive than for a fixed-rate plan.
Renewable energy plans
If you want to enroll in a plan that specializes in 100% renewable energy sourcing, look for “green energy” plans and read the terms of service to find exactly how much of the plan is renewable. Double-check the price, too, because sometimes 100% renewable plans come at a higher cost. In the fine print you should be able to see if the provider has 100% renewable energy sources built into their advertised price or if it’s an upgrade at additional cost.
Renewable energy plans are great for the eco-conscious who want to do their part in reducing rapid climate change, as fossil fuel burning for energy is a major contributor to a warming climate. Adding solar panels to your rooftop is another great way to lower your electric bill and help the environment. Since solar panels come at a high upfront cost, some people use renewable energy plans as another way to contribute to the renewable energy initiatives.
EV incentive plans
Some retailers offer plans customized for EV drivers, such as bill credits and lower rates in the evening when many are charging their EVs.
Solar buyback plans
If you have solar panels or are looking to eventually install them, you may want to look into an electricity plan that rewards you with bill credits for your excess energy.
Time-of-use or ‘free electricity’ plans
Time-of-use electric plans in Texas are designed to reward you with lower rates or “free periods” if you use your energy during off-peak hours. If used properly, these plans can be financially beneficial, but they can also be more expensive since the rates during peak times are higher. These plans are great if you work at night and sleep during the day or if you make a hobby of chasing the best deal while staying on top of consumption patterns. If you are not in one of these camps, you may want to think twice about enrolling.
How do you find the best electricity rates in Texas?
In Texas, the electricity facts label — or EFL — is your source of truth. Don’t trust the advertised rate alone. Some electric plans in Texas have additional fees added to your bill if or when you use above or below a certain amount of energy.
“Disentangling those can make it hard to shop around.” But the state’s Public Utility Commission trusted shopping website, called PowerToChoose.com, is a trusted marketplace. “If a retailer is listed on one of these PUC sites, they have been vetted by the Public Utility Commission,” said Sioshansi. “At least you know that you’re not signing up to some nefarious scam artist or something like that.”
No matter where you choose your plan, pay attention to the details in the fine print, Sioshansi warns. For example, “some retail suppliers will give you a really nice rate for six months, but then, at the end of six months, the retailer has the option to reset to essentially whatever price it wants.” You need to be on top of the terms and conditions, said Sioshansi.
When shopping for electricity plans in Texas, take your time and don’t rush your decision. Knowing how much electricity you use in the warm versus cooler months is important to help you navigate which plans tack on fees for low or high usage. Always read your EFL carefully and ask questions before you enroll.
For example, the rate on display for the Frontier Saver 24-month plan shows 12.3 cents per kWh (Oncor area). Yet, if you peek inside the EFL, you can see there is a usage credit of $125 if your consumption stays above 1,000 kWh per month. Let’s say you live in a small apartment or you’re not home often and you use less than 1,000 kWh, you’d pay 25.2 cents per kWh instead that month. Therefore, the rate on display — or the marketing or advertised rate — would only be a good choice for a specific consumption profile.
There are hundreds of retail electric companies in Texas. The Texas Public Utility Commission has all certified electric retailers listed here.
What should you look for when choosing an electricity plan in Texas?
Most electricity shopping websites have a filter option to sort by your usage. For example, on Choose Energy, which shares a parent company with CNET, you can filter by 500, 1,000, or 2,000 kWh usage, which is how each EFL is structured. This narrows the proposed plans by the ones that would benefit your usage profile the most.
You can look for specialty plans such as “free electricity” plans. These plans can be beneficial to some people, but cost you more in the long run if not used properly.
Some gimmicks may suit you, though, For example, some plans may reward you for using rooftop solar panels and earn credits for your excess energy. EV drivers may want to seek out a plan that provides free EV charging hours.
Some plans offer 100% renewable energy already included in your cost and others offer renewable energy credits — RECs — at an additional cost.
How to make the switch in Texas
You can enroll in any electricity plan in Texas by phone or online.
If you are moving, have your new address ready. Electric rates are address-specific and you won’t be able to get an accurate quote without it. The electricity provider and utility also will need your full address to know where to send the electricity and the bill. Some plans will allow you to transfer your service, as long as that provider is available at the location where you are moving.
If you are switching, you’ll want to know the date your current contract ends. You’ll have a 30-day window to make switches at the end of your agreement.
If you are switching before your contract is over, you could face an early termination fee. If this is the case, it’s good practice to contact your provider first to learn your options.