Texas electricity rates

Texas runs its own grid. ERCOT covers roughly ninety per cent of the state's load and is not synchronously connected to the rest of the country, which means it is not subject to FERC's wholesale market jurisdiction the way other regions are. It also means Texas has no capacity market. Generators earn from energy and ancillary services alone, and scarcity pricing is the mechanism that signals new investment.

Generation is dominated by natural gas and wind, with rapidly growing solar and battery capacity. West Texas wind and Permian-adjacent solar have added enormous zero-fuel-cost supply, which holds average prices down. Gas sets the marginal price when they are not producing.

The state's rate sits below the national average, but the average conceals wide variation. Two households on the same street can pay very different rates depending on which retail plan they signed and when.

Winter Storm Uri in February 2021 remains the defining event. Wholesale prices hit the cap for days, several retailers failed, and the resulting costs are still being recovered through charges that appear on bills across the state.

In the competitive area, three functions are separated. Transmission and distribution utilities (Oncor, CenterPoint Energy, AEP Texas, Texas-New Mexico Power) own the wires and are regulated. Retail electric providers sell the plan and send the bill. Generators sell into ERCOT. The state runs Power to Choose, an official comparison site.

Outside the competitive area, municipal utilities such as Austin Energy and CPS Energy in San Antonio, plus co-operatives, serve their territories under the traditional model with no choice available.

Read the Electricity Facts Label before you sign anything. The most common expensive mistake in Texas is a plan whose advertised rate applies only at one specific usage level, typically 1,000 kWh, and is much worse above or below it. The EFL shows the rate at 500, 1,000 and 2,000 kWh.

Avoid wholesale-indexed residential plans. They were the mechanism behind the catastrophic bills during Uri, and the upside in normal months is small relative to the tail risk.

Set a calendar reminder for the contract expiry date. Holdover rates after a fixed term ends are usually far above market, and the rollover is automatic.