Texas Electricity Rates Explained: Retail Choice in ERCOT Territory

Two companies on every bill, only one of them chosen

Short answer: In most of Texas, electricity is unbundled: a regulated transmission and distribution utility (the wires company: Oncor, CenterPoint, AEP, TNMP, depending on where you live) delivers power, and a competitive retail electric provider (REP) sells you the energy. You cannot choose your wires company; you can and must choose your REP, because letting a plan lapse can quietly move you onto expensive month-to-month pricing.

This guide explains the market structure using the Public Utility Commission of Texas (PUCT) and its official Power to Choose comparison site as references. It deliberately avoids quoting today's rates; in a competitive market the honest number is the one quoted for your address and usage this week.

Who does what

• ERCOT operates the grid for most of Texas and runs the wholesale market where energy is traded.
• The wires company (TDU) owns poles, meters, and outage response. Its delivery charges are regulated by the PUCT and appear on every bill in its territory regardless of your REP.
• Your REP buys wholesale power and sells you a retail plan: the energy price, term, and conditions are the competitive layer.
• Exceptions: municipal utilities (like Austin Energy and CPS Energy in San Antonio), electric cooperatives, and the El Paso and Panhandle areas sit outside ERCOT retail choice in whole or part. If you have a muni or co-op, you have their rate schedule instead of a market.

The plan types you will meet on Power to Choose

• Fixed-rate term plans: one energy price for the contract term. The default sane choice for most households.
• Variable-rate plans: price can change monthly. Sometimes cheap, never predictable; the risk is yours.
• Indexed plans: price tied to a wholesale index; transparent in theory, volatile in practice.
• Time-of-use plans: cheaper nights or weekends against pricier peaks; valuable if your usage (especially EV charging) can move, modeled with our time-of-use strategy guide.
• Prepaid plans: pay in advance, no deposit; monitor balances closely.
• Renewable-content plans: specify the renewable percentage; read how the claim is backed in the EFL.

Every plan publishes an Electricity Facts Label: average prices at standardized usage levels, fees, and contract terms. Read the EFL, not the banner.

The comparison discipline

1. Know your usage shape. Twelve months of kWh from past bills. Texas bills are summer-dominated by air conditioning; a plan that flatters winter usage lies about July.
2. Compare at your usage. Power to Choose lets you filter and rank by usage level; the PUCT built it precisely because advertised average prices are computed at flattering volumes.
3. Add the delivery charges. The wires charges pass through on every plan in your territory, so a full-bill comparison needs them included. Our bill breakdown shows the anatomy.
4. Check the non-price terms: base charges, minimum-usage fees, early termination fees, and what happens at contract end.
5. Calendar the end date. The expensive plan in Texas is the one you forgot to renew; set the reminder the day you sign.

Why Texas bills swing

Wholesale prices in ERCOT respond to heat, cold snaps, and plant outages, and variable or indexed retail customers feel that through their plans; the February 2021 winter storm Uri is the standing lesson in why uncapped exposure is dangerous for households. Fixed-term plans move that risk to the REP, which is exactly what the modest premium buys. Households also feel seasonality: summer cooling drives annual usage, so plan comparisons made in April misprice August.

Who should not play the market actively

If your usage is low, your tolerance for bill surprises is lower, or you simply will not calendar renewals, a competitively priced fixed term from a reputable REP, renewed on schedule, captures most of the market's value with little attention. Municipal and co-op customers skip the market entirely and should spend the effort on efficiency instead.

Reading an Electricity Facts Label like an auditor

The EFL is the most honest page in Texas electricity, and it rewards five minutes of hostility. Find, in order: the average price at three usage levels (500, 1,000, and 2,000 kWh) and notice which one the advertisement quoted; the base charge, which rewards low users when absent and punishes them when large; minimum-usage fees, which do the opposite; the early termination fee and the date it stops applying; the percentage of renewable content and how it is sourced; and the price-change rules, which separate true fixed plans from fixed-until-we-say-otherwise plans. If a plan cannot survive those five reads, its banner price is irrelevant. Do the same read at renewal, because the plan you are rolled onto at term end rarely resembles the plan you chose, and the EFL for the renewal is a fresh document, not a photocopy.

ERCOT, weather, and what Uri actually changed

The February 2021 storm (Uri) repriced Texas risk permanently. Wholesale prices hit administrative caps for days, some retail customers on wholesale-indexed products received catastrophic bills, and the regulatory response tightened the rules around residential indexed products and provider financial standards. The durable household lessons are three: never hold uncapped wholesale exposure on a home you heat or cool; treat too-cheap variable offers as the risk transfer they are; and remember that a fixed-term plan is insurance whose premium is usually small. Grid reliability work since Uri (weatherization standards, more firm capacity) reduces but does not repeal Texas weather, and summer heat domes now stress the system as reliably as winter storms once did. Your plan choice is where that macro story touches your kitchen table.

Usage tiers, base charges, and the 1,000 kWh limit

Texas marketing loves the 1,000 kWh household because standardized average prices are quoted at round usage levels, and many real households live nowhere near 1,000 kWh in the months that matter. Two traps follow. First, plans can be engineered to look brilliant at exactly 1,000 kWh (bill credits that trigger at a threshold are the classic mechanism) and mediocre at 700 or 1,600. Second, base charges and minimum-usage fees invert the ranking for genuinely low users, such as apartments and efficient small homes. The defenses are the ones in the comparison discipline above: rank plans at your usage on Power to Choose, check for bill-credit cliffs around your typical month, and price a July and a January separately. A plan that wins your actual two months wins the year; a plan that wins the brochure's month wins the brochure.

Municipal and co-op Texas: the other system

Roughly speaking, a substantial minority of Texans never meet Power to Choose because their city or cooperative never opened retail competition. Austin Energy, CPS Energy (San Antonio), and the cooperative territories set rates through their own governance, publish tariff books, and change prices through public processes rather than shopping seasons. If that is you, your optimization is the Ontario skill, not the Alberta one: read the tariff you are on, watch for optional time-of-use or EV riders your utility offers, and put your energy into the usage side. Homes near a boundary sometimes discover their address belongs to the other system than they assumed; your bill's letterhead settles it in one glance, and your REP (or its absence) confirms it.

Either way, the account number on that letterhead is the one your plan, your credit, and your renewal calendar hang from, so it is worth the glance before any optimization begins.

Frequently Asked Questions

Who do I call when the power goes out?

Your wires company (TDU), not your REP. Outages, meters, and streetlights belong to the delivery utility in your territory; the REP handles billing and plans.

What is Power to Choose?

The PUCT's official comparison website for retail offers in ERCOT choice areas. Providers must list their plans' Electricity Facts Labels there; it is the cleanest place to compare at your usage level.

Can my REP change my fixed rate mid-contract?

A genuine fixed-rate plan holds its energy price for the term; charges that can still move are the regulated delivery charges and taxes, which pass through. If a price changed, read the EFL to see which component moved.

Are free-nights plans a good deal?

They can be, for households that genuinely shift most usage into the free window (overnight EV charging is the classic fit). The paid hours carry higher prices, so model with your intervals; the marketing assumes you are the ideal customer.

What happens if my REP goes out of business?

Customers are moved to a provider of last resort under PUCT rules so service continues, usually at less attractive prices. It is a reason to re-shop promptly, not a reason to fear the market.

The bottom line

Shop the competitive layer at your real usage, on the regulator's comparison site, with the facts label open. Fix the term, calendar the renewal, and let the wires charges be the boring constant they are.

About the Editorial Team EnergyBS reviews public program rules, product specifications, utility rates, and reader-facing cost assumptions. Treat savings figures as estimates until you verify local prices, permits, rebates, and contractor quotes.