The deregulated electricity market means you can shop for rates — unlike most states where the utility company is your only option. But that freedom comes with complexity. Hundreds of plans, confusing rate structures, and marketing designed to obscure true costs make it easy to choose badly.
This guide explains how Texas electricity actually works, how to compare plans honestly, and how to avoid the traps that cost homeowners hundreds of dollars per year.
How Texas Electricity Works
The Players
Retail Electric Providers (REPs)
The company you pay. They buy wholesale electricity and sell it to you. This is who you're "shopping" for.
Transmission and Distribution Utilities (TDUs)
The company that owns the wires and delivers electricity. You don't choose this — it's based on where you live. Examples: Oncor (DFW), CenterPoint (Houston).
ERCOT
The Electric Reliability Council of Texas. Manages the Texas power grid. Not a company you interact with directly.
What You're Actually Shopping For
When you compare plans, you're comparing the supply charge — what the REP charges for electricity. The delivery charge from your TDU is the same regardless of which REP you choose.
Your bill = Supply charges (varies by REP) + Delivery charges (fixed by TDU) + Taxes/fees
Where You CAN Shop
| Area | Deregulated? |
|---|---|
| Dallas-Fort Worth (Oncor) | ✅ Yes |
| Houston (CenterPoint) | ✅ Yes |
| Most of Texas | ✅ Yes |
| Austin (Austin Energy) | ❌ No — municipal utility |
| San Antonio (CPS Energy) | ❌ No — municipal utility |
PowerToChoose: The Official Marketplace
What It Is
Power to Choose is the official state marketplace for comparing electricity plans. It's run by the Public Utility Commission of Texas (PUCT).
How to Use It
- Enter your ZIP code
- Review available plans
- Compare the "Average Price per kWh" column
- Click plan name for full Electricity Facts Label (EFL)
Which Usage Level Matters
- 500 kWh: Small apartment, minimal AC use
- 1,000 kWh: Average Texas home, moderate AC
- 2,000 kWh: Large home or heavy summer AC use
Texas average: Most homes use 1,000-1,500 kWh monthly, spiking to 2,000-3,000+ kWh in summer.
The Critical Document: Electricity Facts Label (EFL)
Every plan has an EFL — a standardized disclosure showing actual rates and terms. Always read the EFL before signing up.
- • Price disclosure: Shows exactly how charges calculate
- • Contract terms: Length, cancellation fees
- • Pricing structure: Fixed, variable, tiered, time-of-use
- • Fees: Base charges, minimum usage charges
Rate Structures Explained
Fixed Rate
Predictable costs, budget certainty, protected from market spikes
May miss market drops, early termination fees
Most homeowners who want predictability
Variable Rate
No contract commitment, may benefit from low-price periods
Exposure to market spikes, summer rates can double or triple
Short-term situations, extremely engaged shoppers
Tiered Rate
Can be cheap at low usage
Expensive at high usage (summer), often marketed deceptively
Low-usage households (rare in Texas summer)
Time-of-Use (TOU)
Can save money by shifting usage
AC runs during peak hours (hottest part of day)
Households that can genuinely shift usage (EV charging, flexible schedules)
Variable Rate Warning
Variable rates during Texas summer can be devastating. August wholesale prices regularly spike to 5-10x winter levels.
The "Free" Traps
Free Nights Plans: The Reality
The pitch: "Free electricity from 9 PM to 6 AM!"
- • Daytime rates are MUCH higher ($0.15-$0.20/kWh vs. market $0.10-$0.12)
- • Your AC runs hardest during hot afternoons — not free hours
- • "Free" only applies to energy charge, not delivery charges
- • Net cost often HIGHER than simple fixed-rate plan
The Math
| Plan | Daytime Rate | Night Rate | Summer Bill (2,000 kWh) |
|---|---|---|---|
| Free Nights | $0.18/kWh | "Free" | ~$250-$300 |
| Fixed 12¢ | $0.12/kWh | $0.12/kWh | ~$240 |
Who it works for: Almost nobody. Maybe a home with massive battery storage charging overnight. For typical households, it's worse.
How to Actually Compare Plans
Step 1: Know Your Usage
Pull your last 12 months of electricity bills. Note monthly kWh usage, peak summer usage (July/August), and annual total. Your comparison should focus on your ACTUAL usage pattern, not hypothetical 1,000 kWh.
Step 2: Compare at YOUR Usage Level
PowerToChoose shows 500/1,000/2,000 kWh pricing. If you use 1,800 kWh in summer, calculate what you'd actually pay — don't just look at the 2,000 kWh column.
Step 3: Read the EFL
For your top 3-5 candidates: check the actual rate structure, look for base charges or minimum usage fees, verify contract length and cancellation terms, note renewal terms.
Step 4: Calculate True Annual Cost
The plan with lowest ANNUAL cost wins — not lowest advertised rate. Apply your actual monthly usage to each plan and sum up the year.
Step 5: Check Reputation
Google "[company name] complaints", check BBB rating, read recent reviews (billing issues, customer service), and verify they're licensed with PUCT.
Contract Terms That Matter
Contract Length
- 12-month: Most common, good balance of rate lock and flexibility
- 24-36 month: Longer lock, but you're stuck if rates drop
- Month-to-month: Maximum flexibility, but variable rate risk
Early Termination Fees
Typical range: $50-$200 (often $150)
Calculate break-even: If switching saves $30/month and fee is $150, you break even in 5 months.
Auto-Renewal Terms
Read carefully. Many contracts auto-renew to variable rate (often much higher), new fixed rate, or month-to-month. Set a reminder 30-60 days before contract ends to shop again.
Base Charges
Some plans have monthly base charges ($5-$15) regardless of usage. Factor these into comparisons.
When to Shop
Best Times to Lock Rates
- Fall (October-November): Demand is low, rates often favorable
- Spring (March-April): Before summer demand spikes
Worst Times to Lock Rates
- Summer (June-August): Demand peaks, rates highest
- During extreme weather events: Market volatility
Red Flags
| Warning Sign | What It Means |
|---|---|
| Rate seems too low | Hidden fees, usage tiers, or gimmicks |
| "Free" anything | Higher rates elsewhere in plan |
| Complex rate structure | Designed to confuse |
| Very short promotional period | Spikes after promo ends |
| Poor reviews mentioning billing | Accounting "errors" in company's favor |
| Pressure to sign immediately | Don't want you to compare |
HVAC Connection: Why This Matters
Air conditioning typically represents 40-60% of summer electricity bills. Your electricity rate directly impacts your cooling costs.
Example impact:
- At $0.10/kWh with 1,500 kWh AC use: $150/month
- At $0.14/kWh with 1,500 kWh AC use: $210/month
- $0.04/kWh difference = $60/month more = $240 over summer
Choosing wisely saves real money — often more than many "efficiency" upgrades.
Quick Reference: Plan Comparison Checklist
Sources
- Public Utility Commission of Texas (PUCT)
- Power to Choose
- Electric Reliability Council of Texas (ERCOT)
- U.S. Energy Information Administration, Texas electricity data
Disclaimer: Electricity rates and plan terms change frequently. Verify current rates and terms directly with providers before making decisions. This guide provides general information, not specific rate recommendations.