Most Texans get to choose their own electricity provider, putting the buying power in their hands. But before you choose you’re provider, there are some important things to consider. This Texas electricity rates guide will show you how to examine the cost of electrify in different deregulated territories and properly compare rates and to understand a fixed energy charge in Texas.
But first, how did we get here?
In the mid-1990s, Texas began deregulating most of its electricity market, giving customers more options and fostering competition. The Electric Reliability Council of Texas (ERCOT) operators the power grid, and roughly 85% of Texas customers can choose their own electric provider. The move broke up monopolies and separated the industry into three parts:
Production: Power plants generate the energy, and deregulation welcomed innovations in clean energy and more efficient power plants.
Transmission and Distribution Service Providers (TDSPs): These companies (commonly referred to as utility or delivery companies) are the ones that handle the lines, poles, meters and equipment. They are responsible for the delivery of the electricity, and they handle any power outages. The delivery of electricity is regulated and monitored by the Public Utility Commission of Texas. See below for a list of the TDSPs and their service areas.
Retail Electric Providers (REPs): These companies sell the electricity to the end consumer. They are also responsible for billing and customer service. REPs offer electric plans and set the energy charges. So, they compete for customer business. REPs include Ambit Energy, TXU, Reliant and many others.
Texas Deregulated Electricity Territories and TDSPs
As of early 2018, Texas has four deregulated electric delivery territories. Residential and commercial customers in these territories can choose their own Texas electricity provider.
AEP Texas – provides electricity to residents throughout southern and western Texas.
CenterPoint Energy – provides electricity to the 5,000-square-mile Houston metropolitan area.
Oncor – provides electricity to residents of northern, western and central Texas. (Oncor recently acquired the Sharyland Utilities service areas.)
TNMP – provides electricity for western and northern central Texas, as well as areas of the Gulf Coast region.
These utility providers maintain all equipment and lines, as well as meter reading. Any customer in these territories who experience a power outage should contact the utility provider, NOT the electric retail provider.
How to Compare Texas Electricity Rates
It’s important to understand how the deregulated electricity markets in Texas work before comparing rates. When doing so, you have to make sure you are comparing the same thing. It’s not enough just to look at a number on a website.
Because the delivery of the electricity is handled by one company, and the selling/billing is handled by another, electricity charges from both companies will be on your bill. It’s not enough just to shop electricity rates by city or by zip code. What matters is the delivery territory you live in. For example, the 75050 zip code in North Texas is an Oncor service area.
When shopping rates, all charges from the retail provider (REP) and the delivery company (TDSP) have to be factored in. These charges could be a price per kWh used or a fixed/flat fee, or a combination. This is typically referred to as the “average rate.” Some REPs also offer tiered pricing, which charges a different amount within a certain range of kWh used. Others may offer a flat rebate if you go over or stay under a certain kWh threshold. These different options allow the customer to choose which plan best fits the way they use electricity.
Average Texas Electricity Cost per Month
For residential customers, to properly calculate the average rate, add all charges from the REP and TDSP and divide by the kWh used. (Commercial customers are slightly different.)
Example at 1,000 kWh used:
$.06 per kWH
$9.95 base fee
TDSP (Oncor) Charges
$.037 per kWh
In this example, there is a charge per kWh used plus a flat/base fee for both the REP and TDSP. We are estimating 1,000 kWh used, so let’s do the math with the above numbers:
$60 ($.06 x 1,000 kWh)
$37 ($.037 x 1,000 kWh)
Add all that together and you get $110.45. Now that you have the total charge, factoring in all per kWh charges and all flat/base fees, you can divide by the estimate number of kWh used. In this example, that’s 1,000 kWh.
So, $110.45 / 1,000 = 11.05 cents per kWh (average rate).
Why is it so important to do this? Because the average rate is a calculation including all charges. If you estimated 2,500 kWh used, you would get a different calculation. Using the same charges as above, here’s the math:
$150 ($.06 x 2,500 kWh)
$92.50 ($.037 x 2,500 kWh)
This adds up to $255.95. Again, to get the average rate, divide by 2,500 kWh:
$255.95 / 2,500 = 10.2 cents per kWh (average rate)
Does that mean you are paying a different price per kWh? No. It simply means the average rate calculates to be a different number when using a different amount of kWh. The flat/base fees are divided by the kWh used, so you are certainly going to get a different number depending on how many kWh you use in a billing cycle.
So, when comparing rates, be sure to compare the average rate at roughly the same kWh used. Otherwise, you will not be doing a fair apples-to-apples comparison.
Locating the Average Rate on a Texas Electric Bill
No matter who your REP is, the average rate will likely be located on your bill near the detailed portion that displays and breaks down all charges. It will be worded something like this: “The average price you paid for electric service this month is 10.1 cents per kWh.”
This is a quick way to know what your average rate calculates out to be. Also be sure to look at how many kWh you used during a particular billing cycle. Here are a few examples:
Texas Electric Facts Label (EFL)
All details of a retail electricity plan in Texas will be displayed on the Electric Facts Label (EFL). These can be downloaded when shopping plans online. Find the plan details to download the EFL. The EFL will also include other details such as early termination fees, FAQs and Disclosure Chart.
Texas Areas Not Deregulated for Electricity
Yes, there are still several areas in Texas that are not deregulated for electricity. These include municipality-owned utilities (which are run by the city) or cooperatives (co-ops) that have the right to choose whether or not to participate in the Texas retail electric market.
Some of these territories include rural areas of Texas where there is little to no competition anyway. Ultimately, customers of municipality-owned and cooperative utilities have the power to eventually move into deregulation.
Customers in co-ops elect a board of directors to set policies and rates. City council members, or whatever governing body elected, set rates for a municipality-owned utility. Here are some well-known co-ops and municipality-owned utilities:
City of Austin
CPS Energy of San Antonio
Garland Power and Light
Tri-County Electric Co-op
Grayson-Collin Electric Cooperative
Central Texas Electric Co-op