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Jennifer Farrington is a contributing writer at USA TODAY Homefront. She is a Florida native who has more than a decade of writing and editing experience. Jennifer has covered everything from real estate and insurance to personal finance and entertainment.
Due to the passage of a landmark deregulation law in 1999, over 400 Texas cities — including Houston, Fort Worth and Waco — foster a deregulated electricity market. Following these changes in legislation, more than 85% of Texans gained the power to choose an electricity provider, according to Energy Texas.
This disrupts local monopolies and encourages competition among energy companies, or retail electric providers (REP), leading to lower cost per kilowatt-hour (kWh) and better service for you. It also creates a wide array of options to consider in addition to price, such as contract length, plan type and the source of electricity — whether renewable or nonrenewable.
Additionally, equipping your home with power generators, such as solar panels, wind turbines or geothermal heat pumps, may enable you to sell back unused energy to your provider via net metering programs.
With all this power, you’re left with a big decision: choosing the right power provider. Let’s examine the power to choose in Texas and how Powertochoose.org can help you select an electric provider and energy plan.
The energy deregulation law fosters market diversity and efficiency. It forces energy companies to win business by selling power at the lowest rates possible while remaining profitable and offering better service than competitors. It also increases the efficiency of energy production since providers are driven to reduce waste to meet competitive market prices.
With dozens of REPs competing for your business, you have more flexibility to eliminate those with less favorable terms, such as hidden fees and high cancellation costs, to save money.
Consider these factors as your starting point for finding the best REP and electricity plan:
Electric companies aren’t responsible for delivering electricity to your home — that’s handled by transmission and distribution utilities (TDUs) using the existing utility infrastructure. TDUs are regulated entities that do not sell power but deliver it through their power lines and measure usage through their meters at customer sites, said Josh Pesikoff, CEO of Revolution Energy.
TDUs impose state-regulated delivery charges on REPs that trickle down to you and amount to about one-third of your electricity bill, according to TXU Energy. They’re bundled into your energy rate and appear on your statement as the TDU service area or “TDU Delivery Charges.”
Pesikoff used this analogy to clarify: “Think of electricity companies as restaurants and TDUs as UberEats that handle the delivery of your food from these establishments. Both charge fees for their services, and while energy companies set their own electricity rates, TDUs are still regulated by the State of Texas.”
“Think of electricity companies as restaurants and TDUs as UberEats that handle the delivery of your food from these establishments.”Josh Pesikoff, CEO of Revolution Energy
“Think of electricity companies as restaurants and TDUs as UberEats that handle the delivery of your food from these establishments.”
Your energy provider doesn’t pocket these fees — it collects and passes the added cost to the TDUs. Pesikoff expects TDU charges fluctuate roughly twice per year, most likely impacting your electric bill during grid maintenance or after a major weather event.
Yes, you can cancel your electricity service at any time in Texas, but you may incur an early termination fee, calculated for each canceled month in some cases. Let’s say you canceled two months early with a $50 early termination fee. In this example, you’d owe $100 to a REP with a comparable cancellation policy.
Early termination fees offset an electric provider’s losses as some purchase “all or most of the electricity they think they will need at or near the time they sign up the customers,” said Pesikoff.
Tip
State law allows consumers to cancel without a penalty within 14 days of their contract end date, regardless of your REP’s cancellation policy.
Powertochoose.org, run by the Public Utility Commission of Texas (PUC), is a marketplace that allows consumers to compare and choose electricity providers in deregulated parts of Texas. The online tool lets you filter available providers using the following levers:
You can narrow your results using rates and each company’s electricity facts label (EFL). Once you find terms that suit your needs, visit the company’s website to learn more about it and purchase a plan.
Deregulated energy markets allow competition among multiple energy suppliers, allowing them to generate, distribute and sell electricity to consumers. This comes with increased choice, flexibility and the potential for cost savings for you, the buyer. However, these markets present more volatile pricing as rates fluctuate based on market conditions — such as when the Electric Reliability Council of Texas (ERCOT) imposes higher fees on providers.
ERCOT is comparable to a traffic controller for electricity and its primary duty is to maintain the electric grid — the central point where your power comes from. Similar to TDUs, ERCOT also levies operating fees on REPs, which are then passed on to consumers as part of the delivery charges listed on your electricity bill. If the electric grid needs improvements or becomes damaged from a major storm, ERCOT and TDU fees could fluctuate.
In regulated energy markets, prices are dictated by government or regulatory agencies, such as the Transmission and Distribution Utility (TDU) in Texas. Consumers benefit from stable pricing but forfeit their ability to choose an electric provider. Additionally, they might miss out on advancements in the energy sector, such as plans that offer 100% renewable energy.
As you shop for electricity, you’ll want to choose a plan that aligns with your needs. Here are the current plan types available.
Fixed-rate plans don’t change over the contract period, meaning your price per kWh remains the same for the term length you choose. However, your rate can fluctuate minorly if TDU or ERCOT costs increase or decrease. You’ll also incur a cancellation fee if you terminate your policy early.
Rates are extremely volatile with variable-rate plans, and can change from one month to the next. Whether the cost increases or decreases depends on factors like economical fluctuations, cost of electricity production and even the weather — causing a surge in cost during a major storm or natural disaster.
However, cost won’t always increase: A surplus of energy could drive rates down, saving you money. There is no contract or cancellation fee with this plan type, so you can seek out a new REP at any time.
A no-deposit plan, also called a prepaid plan, doesn’t require a deposit or contract, and lets you pay as you go. Monthly bills are not issued, but it is your responsibility to prepay for services to avoid interruptions.
Indexed rate plans, or market rate plans, are comparable to variable-rate plans as prices can fluctuate each month. The fluctuation in price is directly linked to publicly available indexes. Electric providers can, however, provide details on the pricing formula.
Month-to-month plans are generally priced higher than fixed-rate plans. The benefit is that you won’t be subject to a contract or cancellation fee. These plans generally don’t require a deposit or credit check, and are offered as either a prepaid month-to-month plan or variable-rate month-to-month plan.
Prepaid plans do require you to pay for usage at the beginning of the month, though if you exceed that amount, you’ll incur additional fees. Variable-rate month-to-month plans allow you pay at the end of the month, and your rates can change monthly.
These electricity plans use renewable energy sources such as geothermal, landfill gas, biomass, hydroelectric, wind or solar to power your home. While generally pricier, they are usually sold as fixed-rate plans, keeping your electricity costs stable and predictable. Green energy plans offer a way to get the benefits of clean energy without the commitment and expense of installing solar panels onto your home.
According to recent data from the U.S. Energy Information Administration (EIA), the national average price of electricity for residential customers was 15.7 cents per kWh in December 2023. Texas’ average cost per kWh for that same period was 14.6 cents, reflecting a decrease in price compared to the national average. Therefore, Texas customers paid approximately 7.4% less than the national average for electricity in December 2023.
Looking at Texas electricity rates through another lens, we searched powertochoose.org for plans in the eastern Texas ZIP code 77494. In some cases, electricity rates were advertised as low as 8.8 cents for someone who uses 1,000 kWh per month on a three-month, fixed-rate plan — $88 a month. However, rates jumped as high as 17.3 cents or higher for the same usage on a 12-month, fixed-rate electricity plan — $173 per month. Fortunately, a company’s electricity facts label outlines all of this.
A spokesperson for Good Charlie, a Houston-based energy provider, recommended that consumers review this fact sheet before signing a contract to see if the energy charge is flat or tiered. If a provider’s prices advertised at 500, 1,000 and 2,000 kWh thresholds fluctuate between a few cents, they are generally gimmick-free.
“If there are huge jumps or multiple or even 10 to 20 plus cents between those three thresholds, buyer beware,” he added.
As a resident of a deregulated region in Texas, you’ll likely see these recurring charges on your electricity bill:
Electric providers generally advertise price per kWh at usage levels of 500, 1,000 and 2,000 kWh, though you can use as much or as little electricity as needed. According to the EIA, the average household in Texas uses about 1,078 kWh of electricity monthly.
With a median home size of roughly 1,960 square feet, households use about .550 kWh per square foot per month, or about 550 kWh monthly. To generally estimate your monthly electricity cost, multiply your square footage by 0.550. Then, multiply your estimated monthly kWh usage by a provider’s rate per kWh.
Despite companies outlining the average price per kWh on their EFL, what you’ll pay is based on your energy usage and plan type, whether you have a fixed- or variable-rate contract. You’ll notice that the more energy you use, particularly on fixed-rate plans, the lower your price per kWh is. This is because the base and TDU delivery charges are spread across more kWh.
Many Texans may enjoy more competitive electricity costs than residents of states with regulated energy. But finding the best deal requires an investment of time — and a choice — from you. Compare electric companies on marketplaces like powertochoose.org to avoid unexpected fees that could diminish the advantages of deregulated energy.
While researching, consider other nonrecurring monthly charges lurking in REPs’ EFLs. Also, look for perks, such as usage credits and plans offering renewable energy. Companies such as Gexa Energy offer a credit of $115 on select plans when usage is above or equal to 1,000 kWh.
If you encounter issues with a provider or Powertochoose.org, you should refer your complaints or queries to the PUC.
Editorial note: The name “Homefront” refers to the alliance between USA TODAY and Home Solutions that publishes review, comparison, and informational articles designed to help USA TODAY readers make smarter purchasing and investment decisions about their home. Under the alliance, Homefront provides and publishes research and articles about home service and home improvement topics.
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