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To get the best electricity rates in Texas it is to good understand the ins and outs of the market. In other words, from how rates are determined to how to compare rates between companies.

Our guide will give a rundown on how electricity rates work. This knowledge will empower you to find the cheapest electricity rate in Texas.

We’ll cover electricity rates for the three main branches of the energy sector and how they affect your pocket:

·       Power generators.

·       Retail electric providers (REPs).

·       Transmission and distribution service providers (TDSPs).

What Are The Electricity Rates per kWh in Texas?

When comparing electricity rates in Texas, the primary factor to consider is the price per kilowatt hour (kWh). A kilowatt-hour measures how much energy is supplied and consumed in your home in an hour.

Kilowatt hours are measured using sophisticated metering equipment. The costs of monitoring and maintaining the meter, lines, and poles fall to one of Texas’ five transmission/distribution service providers.

One of the reasons why electricity rates are compared by zip code, is because there is a delivery charge that depend on the utility in each service area.

Service providers use rates like fixed, variable, and indexed. The methodology behind these electricity rates is very different. However, the final product should look the same: an easy to understand price per kWh, measured in cents.

One note on Retail Electricity Providers (REPs) and electricity rates: REPs in Texas are not regulated. This means they are not required to disclose how they arrived at their price per kWh. REPs can change your price per kWh without warning or explanation.

This could happen because the REP did not accurately predict demand. So, it’s important to check the history and reputation of your REP instead of focusing solely on the cheapest prices.

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How the costs travels from Generators to Providers and End Up in your Electricity Rates

Your REP is not the same entity that generates your electricity. One of Texas’ 1030+ wind, solar, coal, hydro electric, and nuclear power generators is responsible for this.

These generators, or power plants, must create electricity to meet demand in real time. Therefore, their prices are based on predictions and forecasts using historical data.

Generators prefer to price their product based on time windows, generally between 15 minutes to an hour. This means 15 minutes of electricity could cost more at the beginning of the evening when the sun is still out. But typically generators charge less for electricity rates later in the night. Now you get the idea, that’s why some electricity plans offer free nights.

Generators across the state forecast how much it will cost to generate electricity during a given time window. Then, they submit these estimates as bids to the Electric Reliability Council of Texas (ERCOT). Next, the electricity providers (REPs) accept the lowest bids to purchase enough electricity to meet their forecasted demand.


Electricity Generation Fixed costs:

Fixed costs usually don’t change over time, such as capital expenses related to equipment, regulation, or the facility itself. In Texas, fixed costs are generally lower than in most other states.


Electricity Generation Variable costs:

As the name implies, variable costs are subject to frequent and sometimes dramatic changes in response to market conditions. The most common variable cost that generators deal with is fuel. However, something like labor, land leases, and maintenance can also become variable as the market fluctuates.

Renewable generators like wind or solar farms of course use free fuel. So their costs are concentrated on labor and the land or facilities for their generators. Other generators, like coal or nuclear plants, can vary greatly in response to the price of fuels.

Two More Factors Driving the Cost of Electricity Generation

The impact of Supply and Demand on electricity rates

Electricity can’t be stored in a warehouse until it’s needed. It must be generated in real time in response to demand.

Every week night, millions of consumers come home and turn on their lights and the air conditioning or heater. As demand increases like this, REPs need more electricity all at once to keep up with consumer demand.

At times of higher demand, generators can charge more for their product since more is needed imminently to cover demand.

Conversely, generators cannot charge as much during the evening when everyone has gone to sleep. During these times, prices will fall because demand has fallen.

Some generators (such as nuclear plants) cannot easily power down, so they keep running even when demand isn’t high. This surplus will drive prices down further and in some rare cases even cause prices to drop below zero.

Because of how supply and demand impact the rates, all pricing from generators and REPs has to be done in advance.

How Seasonal Fluctuations impact Texas electricity prices

In Texas, electricity generators are not regulated and can charge any price for their product. It’s up to the market (REPs) to determine if the price is fair for the given period.

The primary factor that influences demand is weather. But factors like the time of day, weekends, natural disasters, and even scheduled maintenance can affect the cost of electricity.

During the summer, particularly July and August, electricity rates rise to their highest in Texas. This is due to soaring demand created by millions of air conditioners running at the same time.

How utility companies affect your electricity rates

Transmission/Distribution Service Providers (TDSPS or TDUs) are sill fully subject to Texas energy market state regulations.

The Public Utilities Commission of Texas (PUCT) is responsible for overseeing the operations of TDSPs.

This includes approving rates, infrastructure upgrades, setting safety requirements, and directing investments into new technologies or lines.

Responsibilities and challenges of Texas utility companies

TDP’s are responsible for providing a service that meets the state’s regulation regarding safety, performance, and consumer protections. In exchange for that, TDSPs are the sole owners of the state’s power lines, poles, and meters.

They alone profit from the use of electric equipment and infrastructure. Plus, any new generator or REP that sells electricity gets their delivery service from the TDSPs.

The downside of this sole ownership is its responsibility.

TDSPs are not just sitting around. They are responsible for delivering power to ERCOT’s 26 million customers. This requires constant maintenance of facilities, powerlines, and poles.

This means TDSPs are the companies on call in emergencies. They’ll be the ones sending workers to repair fallen or damaged power lines.

Besides regular maintenance, TDSPs must upgrade their infrastructure to keep up with new technology and evolving electricity generation. They also need to make a profit, or else they would have no incentive to provide the service.

These responsibilities come with costs. Ultimately REPs, generators, and Texas’ power consumers pay for it. The PUCT calculates these costs and sets a base rate , determining what TDSPs charge REPs for their services.

The Weather and Peak Demand Drive Texas Electricity Rates

In the summer of 2022, Texans’ saw all time heat and electricity rate records threatened across the state. The extreme heat of the summer sun places a tremendous strain on Texas’ energy grid.

To meet this kind of demand, infrastructure needs to be in place in advance. A demand spike could happen at any time, and the infrastructure needs to be able to handle it. That kind of power supply surge needs to last over a sustained period without maintenance or downtime.

This means PUCT determines the prices that TDSPs can charge based on peak demand capacity, even during months with lower demand.

In short, the cost of maintaining such a large capacity persists even when that capacity isn’t in use.

The PUCT maintains an annual rate comparison page with historical data. It gives you an idea of prices during the most expensive months and general fluctuations in electricity rates.

Also the EIA (Energy Information Administration) tracks electricity rates in all states across the nation. This includes residential electricity rates, commercials and industrial rates. They also publish historial information for estimated electric bills in Texas.

How to Compare Electricity Plans

Texan’s have the power to choose energy companies and switch electric providers. However with more 100 light companies, having many energy options can be overwhelming. So to get a low monthly electric bill you need to compare electricity plans and rates in Houston, Dallas, and other Texas competitive markets.

Most people are familiar with electric rates comparison sites to shop for electricity in Texas. Most of them seem easy to use as they only ask you to enter your zip code. Then you only use filters to find green energy or any other plan that you like.

However, be careful, behind that perceived simplicity there is a huge blind spot. This is because none of those websites can compared plans based on your real electricity consumption.

So, the smart and easiest way to compare electricity rates in Texas is to let EnerWisely do it for you.

Our free and smart electricity rate comparison tool is available 24/7. We’ll help you link your consumption data to automate and simplify the process. You will get easy to understand matching scores that tell you what is the cheapest electricity plan for you.

However, it doesn’t hurt to know more about how electricity rates are determined, so read on.

EnerWisely is the smart, and easy way to compare energy rates in Texas.


1- First of all, signup for FREE to link your consumption history and automate the process. All you need is your address, meter number, and the name of your electricity provider.
2- Next, enter the things that matter to you when comparing electricity rates. EnerWisely can evaluate price, renewable, provider rating and compare versus your current plan if you know your rates and cancelation fees.
3- That’s it, Order your perfect plan and start saving.  Your top matches are scored and ranked based on how well they work for you.

In just minutes, EnerWisely compares multiple electricity companies, plans and rates to find the best deal for you based on your consumption. Once you set up your account, the process is automatic.

A much better comparison tool than any other free or paid service in Texas, including ogres, wizards, bots and genies. So know you know, start taking advantage today.

Feel free to visit your dashboard as often as you like to make sure that you’re always getting the best deals. Also take advantage of all the perks that EnerWisely offers including your home energy efficiency audit.

EnerWisely works for customers of all electricity companies in Texas competitive markets.

But hurry, this free offer is coming to an end soon.

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Types of Electricity Rates

When you’re looking for cheap electricity, look at the rate structure in addition to the electricity rate itself.

There are three main kinds of rates that you’ll encounter:


  • Fixed Electricity Rates

These rates are locked in place for a certain period once you sign the contract. In general, fixed-rate agreements are for increments of 6, 12, or 24 months at a time. Your electricity provider forecasts what they believe will be the average electric rate in Texas.

Then they sell you a fixed-rate plan with an electricity rate they consider to be profitable throughout the contract. The benefit of fixed-rate plans is stability, while the downside could be higher pricing, especially over long periods.


  • Variable Electricity Rates:

These rates can change in response to market conditions, like a sudden increase or decrease in demand. In general, variable electricity rates are not predictable and can lead to vastly higher rates than fixed plans, especially during summer. Variable rate plans tend to be risky if you can’t predict the energy market. Plus, given the increasing rate of natural disasters and extreme weather events, they may not be the most pragmatic choice.


  • Indexed Electricity Rates:

These plans are tied directly to the price of energy. Similar to variable rate plans, they will be very responsive to changes in the market.

However, unlike standard variable rate plans, the formula for determining the price of energy should be transparent. The main advantage of an indexed plan is its predictable in the short-term. However, the world’s energy market will directly affect your price per kWh.

This is not an exhaustive list of the types of electricity rates, only the most common.

Other types of rates include usage time-based rates, which consider the time of day you’re using your electricity. We also have prepaid plans, which require you to pay for the month, week, or day in advance.

Deposit Requirements

Some electricity companies require a deposit before taking you up as a customer. This is often based on your credit. (If an electricity company wants to check your credit score, it’s for this purpose.)

If you have a good credit score, you may be able to dodge the deposit requirements.

It’s worth to shop around for companies in your area that don’t charge deposits or might waive them.

Reputation and Price History

REPs are not regulated or required to explain their prices (except for indexed rate plans). So it’s important to take a look at the historical prices of each REP. See if they generally conform to market conditions in a predictable way.

While the market might not be predictable, how an REP reacts to it will be. Check PUCT’s rate comparison report often. It’s updated four times yearly, with the latest data directly showing the electricity rates between each REP.

If a company consistently offers lower electricity rates than their competitors, very likely they’re better at predicting demand. It could also mean they are more efficient in their processes, which may indicate that they’re your best option.

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Texas Electricity Rates FAQ

Current Electric Rates in Texas – Last updated November 2022

  • The average Texas commercial electricity rate is 10.04 ¢/kWh (25% lower than the national average).
  • The average Texas residential electricity rate is 13.93 ¢/kWh (12% lower than the national average).
Source: Texas energy data from The U.S. Energy Information Administration (EIA)

The price of natural gas has gone up tremendously as a result of four main factor

  • the war in Ukraine
  • inflation
  • increases in power demand in Texas
  • lingering effects of Texas winter storm

Raising natural gas prices affect Texas electric rates because it is used by the power plants in the state to generate the electricity to goes  to the grid.

To best way to avoid irritating high electricity bills in this environment is to lock prices with a fixed- electricity rate plan.

For more details, read our article about what caused Texas electricity prices to spike 

There is not a simple answer to this question. Texas electricity companies are very creative regarding types of light plans and rates. So it really depends on the type of electricity rate and where or not it works for your consumption.

In the end, there are not good or bad plans, what happens is that some don’t work for you. However, the same plan can be best deal for somebody else with a consumption profile that meets the plan requirements.

Each different type of electricity plans uses a different pricing structure. Knowing how electricity rates work will help you look beyond advertised prices.

To learn more about Texas Electricity Plans, read our ultimate guide. Learn everything there is to know and save money.

Also, here is a list of some of the top Texas Electricity Providers. Click in the link to read reviews and see if they might be right light company for you.

There are over +100 retail electricity provider. You can go to Power to Choose and see plans from all these companies. However, be aware that the experience can be overwhelming. There is a reason why Power to Choose was called Power to Confuse. The better choice is to use a smart shopping tool like EnerWisely to find the cheapest plan automatically based on your consumption. Quick, Easy & Free!

Switching electricity plans is easy. Simply signup for a free account with EnerWisely and shop for the best deal. We will automate the process of comparing electricity providers and plans.

Texas Law allows you to terminate your existing contract within 14 days of its expiration without any early termination penalty. You can also register for your new plan and set a start date 60 days in advance. Take advantage of our electricity plan reminder service, and we will remind you when it is time to switch.

Your current electricity provider will likely raise your rates when your contract expires. So, it is essential to compare plans and look for a better alternative before your plan’s expiration.

As a result, you will keep getting the cheapest electric rates. This simple step can help you save hundreds or maybe thousands of dollars on your new plan.

EnerWisely makes Switching electricity plans easy:

· Simply signup and start using EnerWisely innovative shopping tool for free

· No need to call your existing company.

· It is not necessary to have an in-home visit.

· You will have no disruption in your service

· The entire process takes minutes.

Sign up for EnerWisely to get free comparisons of power rates between different providers. EnerWisely automates the comparison process. All you need to do is link your consumption data. Check your dashboard regularly to make sure you’re getting the best deal.

Get more information reading our helpful blog How to Find the Best Energy Rates in Texas

The cheapest electric rates depend on the light company, the type of plan you choose, and your consumption profile. Whether you’re choosing an electric company without cancellation fees, no deposit, or green, EnerWisely has you covered. Our Smart comparison tool will help you shop for the best deal automatically.

For more information, read our full article How to Find the Cheapest Energy Rates in Texas?

No, your electric company selection does not affect the reliability of your electricity service in Texas because it is the utility company that delivers the electrons to your home or business.

Your best light company in Texas will offer you the lowest electric rates based on your home’s kWh usage profile.

Compare energy plans and electricity rates based on your home’s electricity usage to reduce confusion. Use your Power to Choose your energy plan based on your usage with EnerWisely. It will help you compare the best rates from trusted and reliable electricity providers.

There are many factors complicating the forecast of Texas Electricity Prices. As a result of the spike in gas prices, and the extreme weather many homes and business saw their utility bills increased dramatically.  To understand what is happening and know what to expect, read our electricity price forecast

Also avoid surprising electric bills by locking in a fixed-rate energy plan today.

Get the Best Electricity Rates and Maximize your Savings in Texas

As discussed above, several factors go into how REPs assign prices to their services. A general understanding of market trends, historical data, and REP rating can be helpful.

However, you don’t need an expert to shop electric rates and choose the cheapest energy plan for your home.

Fortunately, the smart shopping tool to compare all these details based on your consumption is now available. EnerWisely can help you simplify and save money by automatically matching you with the cheapest electricity rate in your area.

And if you really want to lower your electricity bills, let EnerWisely help you improve your energy efficiency too.

Click here start comparing electricity rates and start saving money today using EnerWisely free online tool.

Current Texas Electricity Rates


Plan Name Term Rate/KWh

These Electricity rates were updated on . The pricing shown is based on an exact usage of 1000 KWh. Price include all fees, and delivery charges. The plans shown are for Zip code – 75201.

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