The majority of Texas has a deregulated energy market, which means residents can choose from a variety of retail electricity providers (REP) and energy plans based on factors such as electricity rates, contract lengths and more.
Unlike a regulated market, Texans can pick their power company rather than having to depend on a single utility company. The presence of numerous competing providers has created competition and lowered the average electricity price in Texas. According to data from the U.S. Energy Information Administration (EIA), Texas has an average electricity rate of 15.61 cents per kilowatt-hour (kWh), which is lower than the national average of 16.94 cents per kWh.
What Is Energy Deregulation in Texas?
Energy deregulation in Texas involves breaking up energy monopolies, creating competition between energy companies and giving customers the power of choice. Texas deregulated its energy sector when it passed Senate Bill 7 in 1999, although the legislation didn’t take effect until 2002.
Thanks to deregulation, Texas now has nearly 140 energy providers offering hundreds of electric plan options at competitive pricing. The Public Utilities Commission of Texas (PUCT) oversees regulations related to the deregulated market and also has its own plan comparison website called Power to Choose.
Pros of Deregulated Energy in Texas
Electricity deregulation in Texas has led to several benefits, mainly related to cost and options.
- Increased competition leading to better service and lower energy rates
- Variety of plan options, such as fixed or variable rate plans, prepaid plans and more
- Choice of type of energy, including 100% renewable energy plans
Cons of Deregulated Energy in Texas
Despite its obvious benefits, deregulation has also brought some unwanted side effects.
- Too many plan options can cause confusion.
- Some providers may use deceptive marketing or confusing rates to lure customers.
- The whims of supply and demand cause energy prices to be unpredictable, especially in events of extreme weather or fuel supply issues.
How Does Energy Deregulation Work in Texas?
The deregulated electricity industry in Texas created a free market with four key components: energy generators, utility companies, retail providers, and finally, the consumers. Generators operate power stations to generate electric power from raw materials such as coal, nuclear power, solar energy and wind.
Utility companies, such as Oncor, are responsible for building, maintaining and upgrading the electric grid and transmission and distribution infrastructure, including transmission towers, cables, substations and transformers.
Retail electric providers (REPs) purchase electricity from the wholesale market, create and market several electric plans, and work with utilities to bring power to the final consumers — Texas homes and businesses. However, roughly 15% of Texas is still a regulated market, including cities such as Austin and San Antonio.
How To Choose a Retail Electricity Provider
Due to the vast number of options in the Texas power market, choosing an electricity provider takes time and effort. Some key factors to consider when comparing and choosing a provider are their electric rates, quality of customer service and contract terms.
You can get an idea of a company’s service quality by looking at reviews, ratings and complaints from the provider’s existing customers.
Retail Energy Provider | Our Rating | Customer Satisfaction Score | BBB Rating |
|---|---|---|---|
TXU Energy | 4.9 | 4.7 | A+ |
Green Mountain Energy | 4.9 | 5 | A+ |
Reliant Energy | 4.9 | 4.8 | NR |
TriEagle Energy | 4.8 | 4.6 | A+ |
Express Energy | 4.8 | 5 | A+ |
4Change Energy | 4.7 | 4.8 | A+ |
Discount Power | 4.7 | 4.5 | NR |
Gexa Energy | 4.6 | 4.2 | C |
Direct Energy | 4.6 | 4.5 | NR |
Frontier Utilities | 4.5 | 4 | NR |
Types of Electricity Plans
Texas’ market deregulation has resulted in the availability of several billing plans. While some plans seem more attractive at first glance, it’s important to understand a plan type properly before choosing. Below are the most common plan types:
- Fixed-rate plans: Fixed-rate plans are simple, traditional plans with a contract length ranging from six to 36 months. They have an unchanging rate for the length of the contract and are generally less prone to billing surprises.
- Variable-rate plans: With a variable-rate plan, your electricity price will change based on market trends. While you may occasionally secure lower rates, you’ll risk expensive electricity costs most of the year. However, you won’t need to sign a contract.
- Prepaid plans: Prepaid plans are a great option if you want to avoid credit checks or deposits. However, these plans tend to charge higher rates than postpaid plans.
- Bill credit plans: These plans offer a bill credit when you hit a certain consumption threshold. For example, some plans offer a $100 credit when your usage meets or exceeds 1,000 kWh. However, bill credit plans are not necessarily cheaper than other, simpler plan options and may lead to unexpectedly high bills.
To choose an energy plan that suits you best, understand your energy consumption values and select an option with a low rate for your energy usage level. We also recommend sticking to simple plans without any perks that sound too good to be true and reading the fine print.
How Do I Switch To a Different Energy Provider?
You can switch to a different energy provider in three easy steps:
- Enter your ZIP code below to review providers and plans for your home.
- Identify which plan you’d like to switch to.
- Enter your information and switch your provider in minutes.
The Difference Between Utility Companies and Retail Electricity Providers
In Texas, transmission and distribution utility (TDU) companies build, maintain and upgrade the infrastructure responsible for electricity transmission. These electric utility companies are also known as Transmission and Distribution Service Providers (TDSP).
On the other hand, retail electricity providers (REP) create electricity plans and market them to the customers. Providers purchase electricity in wholesale auctions from power generation companies and work with TDUs to supply this energy to consumers through a variety of pricing packages.
Responsibilities of Transmission and Distribution Service Providers (TDSPs)
TDSPs maintain and upgrade the state’s electrical infrastructure, including equipment such as towers, cables, transformers, distribution panels, transmission lines, power lines and more. TDSPs work with power plants and retail providers to supply energy to customers. In short, they ensure that you secure reliable electricity service.
They also handle the metering and address issues such as power outages, including blackouts, brownouts and other emergencies. Texas is home to six TDSPs: Oncor Electric Delivery, CenterPoint Energy, Texas-New Mexico Power (TNMP), American Electric Power (AEP) Texas Central, AEP Texas North and Lubbock Power & Light (LP&L).
How Does Texas Protect Deregulated Energy Customers?
The PUCT has created several regulations to protect deregulated energy customers from malpractice and risk. For example, providers cannot discriminate between customers or switch them to another supplier in an unauthorized manner. Providers are also required by law to provide a 10-day notice before disconnecting a power supply.
Customers are also protected against disconnection during severe weather events. If you face issues with an energy supplier, you can lodge a complaint against the supplier, and the PUCT will take necessary action.
Understanding the Public Utility Commission of Texas (PUCT)
The PUCT is a state agency responsible for the economic regulation of the electricity, telecom, water and wastewater utilities in Texas. The PUCT creates laws and enforces market rules that promote the reliability of utilities and infrastructure. It also regulates rates and resolves complaints, creating a safe market for customers.
The Role of the Electric Reliability Council of Texas (ERCOT)
The Electric Reliability Council of Texas (ERCOT) oversees and manages the entire Texas power grid, ensuring reliability for deregulated zones in Texas. Most importantly, ERCOT closely monitors and manages energy demand and supply and the resulting variations in the real-time market price of electricity. This is especially important in extreme weather conditions, where emergencies can lead to short supply and increased demand. ERCOT serves more than 27 million customers in deregulated areas of the state. Unlike many other states, ERCOT doesn’t report to the Federal Energy Regulatory Commission (FERC).
Cost Comparison: Deregulated Electricity vs. Regulated Energy in Texas
Deregulation has fostered competition and resulted in lower pricing in regulated areas of Texas compared to deregulated areas. For instance, the average electric rate in San Antonio, a regulated city, is 16.41 cents per kWh, which is higher than the EIA-reported statewide average of 15.61 cents/kWh. Meanwhile, the rate in major deregulated cities, such as Houston, Dallas or Fort Worth, may be lower than the state average due to lower utility delivery rates.
Frequently Asked Questions About Texas Electricity Deregulation
Why did Texas deregulate its electricity market?
Texas deregulated its energy market to break up utility company monopolies and give Texans the power to choose which energy company supplies their electricity. The goal of deregulation was to increase competition between providers and give consumers access to lower energy costs.
How does the Public Utility Commission of Texas protect consumers?
The PUCT has several regulations to protect consumers, including laws related to price fairness, the right to choose a provider, the right to lodge a complaint and more. The PUCT also works with ERCOT to determine when utility companies are allowed to change their delivery fees, which directly impacts consumer pricing.
What should I know about electricity choices if I’m moving to Texas?
Check to see if your new home resides in a deregulated area. If so, you’ll want to compare energy providers to see which light company offers the best energy plan for your home. Consider the square footage of your home, the number of occupants in it and how and when you typically use energy. Knowing this information should help you identify the best plan for your Texas energy needs. Check out our guide on moving to Texas to learn more.
