Texas Electricity Guide for New Residents

One of the biggest surprises for people moving to Texas: you choose your electricity provider. Unlike most states where a single utility serves your area, much of Texas operates a deregulated electricity market. This means you may have dozens of Retail Electric Providers (REPs) competing for your business — and it can be overwhelming if you don't know what to look for. Whether you are moving to Dallas, Houston, Austin, San Antonio, or anywhere else in the state, understanding how Texas electricity works will save you hundreds of dollars every year and prevent costly mistakes.

This guide covers everything you need to know as a new Texas resident: how the ERCOT grid works, the difference between deregulated and municipal markets, what electricity costs to expect, how to choose the right plan, and how to avoid the contract traps that catch thousands of Texans off guard every year.

How Texas Electricity Works

Texas electricity is managed by ERCOT (Electric Reliability Council of Texas), which operates the power grid for most of the state. The actual electricity delivery is handled by your local Transmission and Distribution Utility (TDU) — in Dallas and Fort Worth, that is Oncor; in Houston, it is CenterPoint Energy. But in deregulated areas, you choose your Retail Electric Provider (REP), which is the company you pay your bill to.

Think of it like this: Oncor or CenterPoint maintains the power lines and infrastructure (you cannot choose them), but you pick which company sells you the electrons flowing through those lines. Your TDU handles outages, meter readings, and line maintenance regardless of which REP you select. If your power goes out, you call your TDU, not your REP.

Understanding ERCOT: The Texas Power Grid

ERCOT (Electric Reliability Council of Texas) is one of the most unique power grids in the United States. It manages approximately 90% of the electrical load in Texas, serving over 26 million customers across the state. The grid has roughly 91,000 megawatts of generating capacity from a mix of natural gas, wind, solar, coal, and nuclear sources.

What makes ERCOT unique is that the Texas grid is largely isolated from the rest of the country. The continental United States has two major interconnected power grids: the Eastern Interconnection and the Western Interconnection. Texas deliberately chose to maintain its own independent grid. This isolation means Texas is exempt from Federal Energy Regulatory Commission (FERC) jurisdiction, giving the state full control over its electricity market and regulations through the Public Utility Commission of Texas (PUCT).

However, this independence comes with a significant trade-off: because the Texas grid has only limited connections to the national grids, it cannot easily import large amounts of power from neighboring states during extreme demand events. This vulnerability was devastatingly exposed during Winter Storm Uri in February 2021, when record cold temperatures caused widespread generation failures and days-long outages affecting millions of Texans. Since then, the state has implemented new weatherization requirements for power plants and gas infrastructure, but the fundamental isolation of the grid remains.

One important nuance: not all of Texas is on the ERCOT grid. El Paso is served by El Paso Electric and operates on the Western Interconnection. Parts of the Texas Panhandle and East Texas are connected to the Eastern Interconnection through utilities like Southwestern Public Service and Entergy Texas. If you are moving to one of these areas, the deregulated market rules described in this guide do not apply to you — you will have an assigned utility provider. For the vast majority of Texas relocators moving to major metro areas like Dallas, Houston, Fort Worth, or San Antonio, ERCOT is your grid.

ERCOT operates a wholesale electricity market where power generators compete to sell electricity. This competitive wholesale market is the foundation that enables the retail deregulation you experience as a consumer. Generators submit bids, ERCOT dispatches the lowest-cost generation to meet demand, and Retail Electric Providers purchase that wholesale power to resell to you at retail rates.

Deregulated vs. Municipal: Know Your Market Type

Not every Texas city works the same way when it comes to electricity. The state is split between deregulated markets (where you choose your provider) and municipal/co-op markets (where you have one assigned utility). Knowing which type of market your new city falls into is the first thing you should determine when planning your move.

Deregulated areas include Dallas, Houston, Fort Worth, and most of the DFW metroplex. In these cities, you have access to 50 or more Retail Electric Providers offering hundreds of different plans. The benefits of deregulation include competitive pricing driven by market forces, the ability to choose renewable energy plans, and a wide variety of contract types to fit your needs. The drawbacks are complexity (you must actively shop and compare), the risk of signing up for a bad plan with hidden fees, and variable rates that can spike dramatically during peak demand months.

Municipal utility areas include Austin (served by Austin Energy) and San Antonio (served by CPS Energy). These are city-owned utilities where you have no choice of provider. The benefits include simplicity (no shopping required, one provider handles everything), regulated rate structures, and generally stable pricing. The drawbacks are a lack of competitive options, sometimes higher base rates, and less plan innovation compared to the deregulated market.

Average Monthly Electricity Costs by City

Electricity costs in Texas vary significantly by city, season, and home size. The average Texas home uses between 1,096 and 1,146 kWh per month — roughly 20% more than the national average — largely because of the intense summer air conditioning demand. Below are typical monthly costs for the major metro areas.

These figures represent averages for a typical 1,500-2,000 square foot home. Larger homes, older homes with poor insulation, and homes with older HVAC systems can expect significantly higher bills. Apartments and smaller homes will generally fall below these averages.

How to Choose Your Electricity Plan

If you are moving to a deregulated area, the Public Utility Commission of Texas runs PowerToChoose.org, a comparison tool that shows all available electricity plans for your zip code. Enter your zip code and estimated monthly usage (average Texas home uses about 1,000-1,200 kWh/month) to see available plans sorted by price.

Pay close attention to the price shown at different usage levels. Some plans advertise a low rate at 2,000 kWh but are much more expensive at lower usage levels due to minimum usage charges or bill credits that only kick in at higher consumption. Always check the price at the usage level closest to your expected consumption. For a new apartment, estimate 600-800 kWh. For a mid-size house, estimate 1,000-1,400 kWh. For a large house, estimate 1,500-2,000+ kWh.

Understanding Plan Types

• Fixed-Rate: Locked price per kWh for the entire term. Best for budget predictability. Recommended for most relocators. Terms typically range from 12 to 36 months.
• Variable-Rate: Price changes monthly based on market conditions. Can be cheaper in spring and fall, but expensive in summer when demand surges. Not recommended unless you closely monitor the market.
• Indexed: Tied to a market index (natural gas prices, wholesale electricity). More complex and typically not recommended for newcomers to Texas.
• Prepaid: Pay-as-you-go with no credit check required. Higher rates but no deposit or long-term commitment. Can be useful if you need power immediately and have not yet established Texas credit.
• Free Nights / Free Weekends: Some REPs offer plans with free electricity during certain hours (typically 9 PM to 6 AM) or on weekends. These can be good deals if your usage naturally falls during those windows, but the daytime rate is higher to compensate. Read the EFL carefully to see if the math works for your lifestyle.

Step 3: Read the Electricity Facts Label (EFL)

Every plan has an Electricity Facts Label (EFL) — think of it as a nutrition label for your electricity plan. This is a standardized document required by the Public Utility Commission of Texas, and it is the single most important document to read before signing up for any plan. Key things to check:

• Price at 500, 1000, and 2000 kWh usage levels: These three price points reveal how the plan actually scales. Some plans have steep minimum usage fees that make the 500 kWh price much higher.
• TDU delivery charges: Check whether Transmission and Distribution Utility charges are included in the advertised rate. If not, your actual bill will be higher than the headline price.
• Minimum usage fees: Some plans charge an extra fee if you use less than 1,000 kWh in a month. This is common on plans that advertise bill credits at higher usage tiers.
• Early termination fee: Typically $100-$200, sometimes calculated as $20 per remaining month on the contract. Know what it costs to leave if you find a better deal or need to move.
• Contract length: Longer terms (24-36 months) often have slightly lower rates, but you sacrifice flexibility.
• Renewable content: The EFL shows what percentage of the plan's energy comes from renewable sources.

Seasonal Cost Planning

Texas electricity costs are highly seasonal, and if you are moving from a milder climate, the summer bills can be a serious shock. Understanding the seasonal rhythm of Texas electricity usage is essential for budgeting.

Summer (June through September) is by far the most expensive period. Air conditioning runs 10 to 16 or more hours per day during the peak Texas heat, and monthly usage commonly reaches 1,200 to 2,000+ kWh. Bills during July and August can easily be two to three times your spring or fall bills. It is not unusual for a mid-size home in Dallas or Houston to see $300-$400+ electricity bills in the peak of summer.

Spring and Fall (March through May, October through November) are the cheapest months. Mild temperatures mean minimal HVAC usage, and many Texans can go weeks with their system off entirely. Monthly usage typically drops to 600-800 kWh, and bills can be as low as $60-$100 for a house. This is also the best time to shop for new fixed-rate plans, as wholesale prices tend to be lower.

Winter (December through February) brings moderate bills for most of Texas. Usage typically runs 800-1,000 kWh per month, though occasional cold fronts can spike usage temporarily. Unlike northern states, Texas homes rely heavily on electric heat pumps rather than natural gas furnaces, so your electricity bill captures most of your heating costs.

Smart strategies for managing seasonal costs:

• Install a smart thermostat and set it to 78 degrees Fahrenheit in summer — every degree lower adds roughly 3-5% to your cooling costs
• Use ceiling fans to supplement air conditioning (they allow you to set the thermostat 2-4 degrees higher comfortably)
• Seal windows and doors to prevent cool air from escaping
• Shade west-facing windows, which take the brunt of afternoon sun
• Run major appliances (dishwasher, laundry) during off-peak evening hours
• Budget for summer by setting aside extra money during the cheap spring and fall months

REP Contract Management

One of the most expensive mistakes Texas electricity customers make is forgetting about their contract expiration date. Here is how the trap works: you sign a great 12-month fixed-rate plan at 11 cents per kWh. Twelve months later, the contract expires. Your REP does not cut off your power — instead, they automatically move you to their default month-to-month "holdover" rate. These holdover rates are deliberately expensive, often 15 to 25 cents per kWh, because they are designed to incentivize you to sign a new contract.

Many people do not notice the switch because they do not check their rate — they just see a higher bill and assume it is seasonal. By the time they realize what happened, they may have overpaid for months.

How to protect yourself:

• Set a calendar reminder 30-45 days before your contract end date
• Shop for a new plan on PowerToChoose.org 2-4 weeks before expiration
• Your REP is required to send you a contract expiration notice at least 30 days in advance — watch for it in your email and mail
• Check your current contract for auto-renewal clauses. Some contracts automatically renew at a different (often higher) rate unless you opt out
• Switching providers in a deregulated market is free (outside of early termination fees on active contracts) and typically takes just 1-3 business days
• Consider using a plan tracking service or app that alerts you when your contract is nearing expiration

Pro Tips for All Texas Relocators

• Summer bills are real: July and August electricity bills in Texas can easily hit $200-$400+ depending on your home size and thermostat setting. If you are moving from a cooler state, budget significantly more for summer electricity than you are used to paying.
• Lock in rates in winter: Fixed-rate plans are typically cheapest if you sign up between October and March when demand is lower and wholesale prices drop. Avoid signing up during peak summer if possible.
• Average apartment usage: A 1-bedroom apartment typically uses 600-800 kWh per month; a 3-bedroom house uses 1,200-1,800 kWh per month. Use these estimates when comparing plans on PowerToChoose.org.
• No deposit option: Many REPs waive deposits with good credit. Some offer prepaid plans with no credit check, which can be useful for newcomers without a Texas credit history.
• Municipal utility cities: If you are moving to Austin or San Antonio, you do not need to shop for a provider — but you should still understand your municipal utility's rate structure, tiered pricing, and any efficiency programs they offer. Both Austin Energy and CPS Energy have time-of-use and efficiency incentive programs.
• Green energy plans: Renewable energy plans are available from most REPs with 100% wind or solar renewable energy certificates, and they are often at competitive rates. Texas is the nation's top wind energy producer, making green plans plentiful and affordable.
• Check your home's insulation: Before blaming your REP for high bills, make sure your home is energy efficient. Poor insulation, single-pane windows, and an aging HVAC system are the most common causes of excessive bills in Texas.