Shopping for energy in Texas can feel overwhelming. Deregulation has led to hundreds of energy plans, dozens of electric companies and lots of confusion. While deregulation means that you have the power to choose your light company, it also means you’re responsible for making the right choice. By reviewing your energy usage needs, comparing electricity rates and selecting the right plan for how you use energy, you may be able to lower your monthly energy costs.
We’ll help you understand the deregulated energy market in Texas, the different energy plan types, how to compare light companies, how to spot deceptive energy plans and how to potentially save money. We can even help you go green if you want to meet your sustainability goals while energy shopping.
Understanding the Texas Energy Market
In the deregulated energy market in Texas, you can select your electricity service provider and energy plan. Deregulation, which took effect in 2002, broke up monopolies, spurring competition among energy providers.
Under the Texas energy market, a three-part system powers your life. The system consists of generators, transmission and distribution utility companies (TDUs) and retail energy providers (REPs). Generators produce electricity from various fuel sources, including natural gas, solar power, nuclear power, coal and wind farms. With oversight from the Electric Reliability Council of Texas (ERCOT) and the Public Utility Commission of Texas (PUCT), light companies purchase power from generators in wholesale auctions. Finally, utility companies deliver that power to homes and businesses across the Lone Star State.
For purchasing an energy plan, paying your bills, and any other customer service needs, you’ll deal almost entirely with your electric company. While light companies handle your billing, utility companies manage the local power grid. You can contact your utility company in the case of a power outage. Below are the six TDUs that manage the grid for deregulated areas of Texas.
- AEP Texas Central: Corpus Christi, McAllen, Victoria, Laredo, Harlingen
- AEP Texas North: Abilene, San Angelo, Alpine, Vernon
- CenterPoint Energy: Houston, Katy, Beaumont
- Lubbock Power & Light (LP&L): Lubbock
- Oncor Electric Delivery: Dallas, Fort Worth, Irving, Waco, Arlington, Temple, Round Rock, Midland, Odessa
- Texas-New Mexico Power (TNMP): League City, Glen Rose, Pecos, Angleton
TDUs vs. REPs
TDUs, more often called utility companies, transmit energy across the power grid and deliver it to homes or businesses. Light companies market energy plans and bill customers for their usage.
Utility companies are also responsible for maintaining power lines and transformers, monitoring meters and responding to power outages. At the same time, your electric company is solely responsible for the marketing of electricity and billing you for your monthly usage. Your electric company will be your point of contact for answering questions about your plans and bills.
Types of Electricity Plans
When comparing energy in Texas, you’ll find that there’s a wide range of electricity plan types, all of which have pros and cons, depending on your energy needs, preferences and budget.
Some plans may advertise ultra-cheap rates that you can only secure through confusing, usage-based discounts. Other plans, such as fixed-rate plans, can be transparent and straightforward while maintaining competitive rates. To find a no-gimmick plan that works best for you, consult the following table and description for each plan type.
| Plan Type | Description | Best For | Pros | Cons |
|---|---|---|---|---|
| Fixed-Rate Plan | A plan with a fixed electricity rate for a set term, typically six months to three years | People who want stability and predictability in costs | Predictable billing; protection from market price fluctuations; competitive rates | Rates don’t change during market dips; early termination fees |
| Variable-Rate Plan | A plan where electricity prices fluctuate based on market conditions | Those who are flexible and can monitor market trends | Flexible contract terms | Rates can spike during high-demand periods; unpredictable bills |
| Prepaid Plan | Electricity with no deposit or credit check requirements, allowing you to prepay for energy | Those who want to prepay for their energy or who need to avoid a deposit | No credit check; no deposit; control over energy spending | High energy charges; disconnection risks |
| Time-of-Use Plan | Discounted rates during off-peak hours but high rates during peak-demand hours | Households that can shift energy usage to off-peak hours | Potential savings on energy bills by using electricity during off-peak times | Requires lifestyle adjustment; high rates during peak hours; confusing rate structures |
| Bill Credit Plan | Charges high base rates but advertises cheap prices through a usage-based discount | Homes that consistently use enough energy to meet the bill credit requirements | May provide very cheap rates | Unpredictable energy costs; very high rates when you don’t secure the bill credit |
Fixed-Rate Plans
Fixed-rate plans feature energy charges that stay the same for the entirety of your contract, providing price protection and bill predictability even when rates across the market spike. These plans are ideal for people who want straightforward, simple billing. Note that fixed-rate plans often charge early termination fees (ETFs) if you cancel your plan early.
Variable-Rate Plans
Variable-rate plans, often referred to as month-to-month plans, charge different rates on a monthly basis depending on market trends. These plans don’t typically require a deposit, nor do they charge any ETFs. Month-to-month plans occasionally offer lower rates but more often charge far higher rates than a standard fixed-rate energy plan. Additionally, rates can skyrocket with no notice. Due to the likelihood of bill surprises, we don’t recommend variable-rate energy plans except as a short-term energy solution.
Prepaid Plans
Prepaid energy plans, also called no-deposit electricity plans, do not require an upfront deposit or down payment for service to begin. They may suit Texans who want to avoid a large initial deposit upon enrollment or who may not have the strongest credit. Our research indicates that Payless Power is the best electric company for prepaid energy.
Time-of-Use Plans
Time-of-use rates vary depending on the time of day or season. During off-peak periods, such as nights or weekends, electricity rates may be extremely low or even free. However, the savings during ultra-cheap periods are typically offset by the paid peak hours, which typically have higher-than-normal rates. These complex rate structures can make it difficult to predict monthly energy bills.
Bill Credits Plans
Electricity companies offer ultra-cheap rates through bill credit plans, which have used-based discounts that can lower your monthly energy bills if your home’s energy usage meets strict requirements. You may be able to enjoy very low rates if your usage stays within the strict range required by the terms of the plan. However, your energy rate can more than double if your usage strays outside of that required range of kilowatt-hours.
Other Electricity Rate Structures
In addition to the common energy plans and rate types above, you can explore a few alternative rate structures, including flat rates and tiered rates.
Flat Rates
In a flat rate structure, you’ll pay a flat monthly charge based on your average annual energy usage. Flat-rate plans are best for customers who prioritize consistent and predictable energy bills. You may find that you pay about the same amount in high-demand seasons, such as summer, while paying far higher monthly energy bills during spring and fall, when low usage would normally bring your energy bills down.
Tiered Rates
Some light companies offer a tiered rate structure, where you’ll enjoy a discounted rate per kilowatt-hour when your usage falls within strict tier requirements. The exact rate discount and usage tiers vary from plan to plan, with some offering discounts between above 800 kWh, while other plans offer discounts above 1,200 kWh but below 1,999 kWh.These plans are similar to bill credits in that you will only enjoy cheap rates if your usage consistently meets the required tier for the discount. Outside of that level, your rate can skyrocket, causing unpredictable energy bills.
Contract Terms and Lengths
Electricity plan contracts are typically offered with varying terms and lengths, including month-to-month contracts, three and six-month contracts, as well as 12, 24, 36 and 60-month contracts. While you may want to time the contract with the duration of your stay in a certain residence, contract length can also impact how much you pay per kilowatt-hour.
- Month-to-month: These plans let you switch providers at virtually any time. However, month-to-month plans, also called variable-rate plans, tend to charge much higher rates than fixed-rate plans. Additionally, rates will change monthly, which almost inevitably leads to unpredictable bills.
- Three, six and nine months: These plans with very short rates tend to charge very cheap rates. While you’ll be able to save during the contract, you’ll have to sign up for a new plan more regularly. Additionally, these ultra-cheap short-term plans are only available to new customers, meaning the savings are truly short term. Finally, pay attention to contract end dates. If you have to re-up in summer when rates have gone up, those short-term savings may end up costing you dearly.
- 12 months: This is the most common term length. Rates vary significantly depending on which plan type you choose, but they can be as cheap as 10 cents per kWh and as high as 20 or more cents per kWh. Generally speaking, these contracts offer a good balance of lower rates and contract stability. We typically recommend 12-month plans.
- 24-month: This contract length is often competitive with 12-month plans in terms of rates. You may even benefit from slightly lower rates, depending on the plan. If you want protection from rate increases for more than a year, consider a 24-month plan. However, they can charge high cancellation fees if you break the contract early.
- 36-month: Plans with a 36-month contract are similar to 24 and 12-month plans in that they offer price protection for an extended time. You’ll generally pay fairly similar rates, although some providers may offer lower rates for 36 months while others may charge more. Typically, 36-month plans will charge very high cancellation fees.
Early Termination and Contract Renewal
Before signing up for an energy plan, note cancellation policies. Light companies may charge early termination fees (ETFs) if you switch providers before your contract ends. These fees can range from $90 to $395, depending on the plan and provider you choose, which can have a big impact on your total energy costs.
While month-to-month plans renew every month, most fixed-rate plans don’t. In fact, if you don’t renew your energy plan after your contract comes to an end, you’ll likely be transferred to a holdover plan with variable rates. These holdover rates are sometimes called “default” or “continuance” rates and can cause budgeting issues and bill surprises. We highly recommend comparing energy providers and signing up for a new energy plan before your current contract comes to an end to avoid being put in a holdover energy plan.
Payment Plans and Billing Options
There are several payment plans available to help customers manage their electricity bills, each designed to cater to different needs, preferences or budgets. Virtually all light companies now allow you to pay for your monthly energy bill online, over the phone or via mail. Most also offer automatic payments, so you can pay your bills without having to lift a finger. Some light companies even offer discounted rates for enrolling in autopay.
In addition to those standard payment methods, many light companies offer alternative payment and billing options. Average billing, also known as budget billing, allows customers to pay a fixed monthly amount based on their average annual consumption, providing consistent payments.
Many light companies offer payment assistance programs to eligible customers facing financial hardship or who need help paying energy bills. These programs, such as the Low Income Energy Assistance Program (LIHEAP), are designed to reduce families’ financial burden of electricity costs.
Renewable Energy Options
Texas is a national leader in renewable energy, so residents can choose from a variety of plans that use wind or solar power. Green energy plans typically charge rates that are competitive with those of traditionally sourced energy plans.
Green Energy Plans
While the statewide average renewable energy content is 33%, you can select energy plans that are sourced from 100% green energy. Many providers also offer the choice of fuel source type, including wind power and solar power. Popular green energy providers include Green Mountain Energy, Gexa Energy, Rhythm Energy and Chariot Energy. Many other top light companies also offer 100% green energy plans, including TXU Energy and Reliant Energy.
To achieve 100% renewable status, some providers rely on Renewable Energy Certificates (RECs), which are a mechanism for tracking and certifying renewable energy production. When solar or wind power is generated, a corresponding number of RECs are issued to the producer. These certificates can then be sold or traded to utilities or businesses to help them meet regulatory requirements or sustainability goals.
Solar Buyback Programs
Solar buyback plans allow Texas homeowners with solar panels to sell excess energy back to the power grid, earning credits for the surplus electricity generated by the panels.
These plans incentivize clean energy production and help homeowners offset costs through sustainable means. They’re best for eco-conscious residents who want to minimize their carbon footprint.
How To Compare Electricity Rates
When comparing electricity rates, you should consider key factors to ensure you enroll in the best plan for your needs, habits and budget. Price per kilowatt-hour is one of the most important, as it directly affects the cost of electricity. However, the lowest rate isn’t always the best option. Factors such as fees and plan structure can impact which plan works best for your needs. You should also consider contract lengths, renewable energy options and the terms set out in your electricity facts label (EFL).
Electricity Facts Labels
The EFL breaks down all of the different charges that come together to make your final energy bill. These fees may include the energy charge, base charge, utility delivery fees and minimum usage fees. This vital document will also detail any relevant discounts and the terms for securing them. These may include bill credits, times of use and rate tiers.
You can also use the EFL to identify the amount of renewable energy in a plan, whether it’s a fixed or variable-rate plan, and how much the plan’s ETF may be. You can use the information in the EFL to identify which plan actually aligns with your personal energy usage, spotting gimmick plans that can cause unpredictable energy bills.
Tips for Choosing an Electricity Provider
When selecting an electricity provider, it’s essential to compare not only rates but also the reputation, customer service and plan offerings. To make sure you’re signing up with a reputable provider, you should spend time thoroughly reading customer reviews and checking the provider’s standing with regulatory bodies, such as the Better Business Bureau (BBB).
Red flags to be aware of when researching providers include:
- Lack of transparency around fees or rate changes
- Excessive penalties or cancellation fees
- Complicated energy contracts that are difficult to understand
- Numerous negative customer reviews
Before enrolling in a plan with a provider, consider calling customer support with questions to gauge their customer service, transparency and reliability. It’s best practice to ask questions about rates, hidden fees, renewable energy options, billing options and anything else that may require additional clarification.
At Home Energy Club, some of our top-rated energy providers include TriEagle Energy, Reliant Energy, TXU Energy and Gexa Energy.
Switching Providers
You may be considering switching energy providers to find a plan or electricity rate that better suits your habits and budget. The best time to begin researching a new provider is a few months before the end of your current contract. This will give you plenty of time to research providers and give notice to your current provider that you will not be continuing service at the end of your contract.
Many light companies offer future start dates between 60 and 90 days in advance. This allows you to take advantage of current low rates by signing up for a plan and scheduling a future service start date, even if your contract is not up for several months.
Frequently Asked Questions About Energy Shopping in Texas
How long does it take to switch electricity providers in Texas?
The typical timeline for switching electricity providers in Texas is between one to two weeks, although it could take longer to switch depending on the provider and your billing cycle. With most energy companies, there’s a one to three-day waiting period for the switch to take effect. Be mindful that the timeline could fluctuate, so it’s best to communicate with both the provider you’re switching to and the provider you’re switching from.
What happens if my electricity provider goes out of business?
If your electricity provider goes out of business, Texas has a Provider of Last Resort (POLR) process to ensure you are never without electricity service. The Public Utility Commission of Texas (PUC) will automatically assign you to a POLR, which is typically a large, established utility company that will provide electricity at a standard rate. However, the rates may differ from your previous contract. During the transition, you can select a new provider.
Do I need to contact my current provider before switching?
You typically won’t need to contact your current energy provider before switching since your new provider handles the switch for you. However, if you’re under a contract, it’s important to check for any early termination fees or other penalty fees. Some energy retailers may charge penalties if you don’t follow the process for termination laid out in your contract, so review your terms thoroughly before making the switch.
What fees should I look out for when choosing an electricity plan?
When enrolling in an electricity plan, it’s important to note rates, plan offerings, renewable energy options and any potential fees, such as minimum use fees, connection fees or early termination fees. These fees can add up quickly and have a big impact on your total energy costs, so thoroughly review your contract terms to avoid surprise bills. Many light companies also offer usage-based discounts. If you fail to qualify for said discount, your rate can increase. While this isn’t technically a fee, it essentially functions like a fee, causing your monthly bills to spike.
