Most Texas households can start electricity service without a deposit, but only if they know which providers to ask and which plan types to look for. This guide explains why deposits exist, who is legally required to offer a deposit waiver, and the three concrete paths available to Texas shoppers right now.

Why Electric Companies Charge a Deposit in Texas

Texas operates a deregulated retail electricity market. Retail Electric Providers (REPs) are private companies that buy power on the wholesale market and resell it to customers. Because REPs extend credit by delivering electricity before the bill is paid, they are exposed to financial risk if a customer leaves an unpaid balance.

To offset that risk, providers check your credit when you apply. The Public Utility Commission of Texas (PUCT) governs this process under the substantive rules in 16 TAC §25.478. Under those rules, a provider may require a deposit when a customer has poor or no credit history. The deposit amount cannot exceed the greater of $150 or one-fifth of the estimated annual bill for residential customers (PUCT rule §25.478(c)(4)).

For a household spending $150 per month on electricity, that cap works out to $360 upfront. For many renters and younger households, that is a real barrier to starting service.

What Counts as a Credit Problem

Providers typically use a soft credit pull from a major bureau or a specialty utility credit report from a company like Equifax's National Consumer Telecom and Utilities Exchange (NCTUE). A score below a provider's internal threshold triggers the deposit requirement.

Common reasons a deposit is required include:

  • No credit history (recent graduates, new immigrants, young adults)
  • Credit score below a provider's cutoff, which varies but often falls between 580 and 620
  • A prior unpaid electricity account sent to collections
  • A bankruptcy on record within the past several years

Note that a deposit requirement is not a rejection. The provider is still offering service; they are simply asking for collateral first.

The PUCT rules give every residential customer the right to avoid a deposit under certain conditions, regardless of credit score. Under 16 TAC §25.478(b), a provider must waive the deposit if the customer meets any of the following criteria:

Active military duty. Any customer who presents a copy of active-duty military orders is entitled to a waiver.

Customer age 65 or older. Customers who are 65 or older and have no outstanding balance with the provider qualify for an automatic waiver.

Acceptable credit history with a prior provider. If a customer can show 12 consecutive months of on-time payments with a previous Texas electricity provider, most REPs must accept that as proof of creditworthiness. Ask the new provider for their specific documentation requirements.

Co-signer or guarantor. A customer who cannot meet the credit threshold can have a creditworthy co-signer assume responsibility for the account, which eliminates the deposit requirement.

If any of these apply to a customer's situation, the right move is to contact the chosen provider before signing up and request the waiver in writing. Providers are required to document the reason a deposit was required or waived (PUCT §25.478(g)).

Path 2: Choose a Prepaid Electricity Plan

Prepaid electricity plans, sometimes listed as "pay-as-you-go" plans on the PUCT's Power to Choose website (powertochoose.org), do not require a credit check and charge no deposit. The customer loads money onto an account before using power, and the balance draws down based on daily consumption.

Several Texas providers specialize in prepaid service, including Payless Power, Pulse Power, and GridPlus (which operates under the Arcadia platform). Plans are also offered by larger REPs such as Reliant and TXU Energy through separate prepaid product lines.

The trade-offs are real and worth understanding before committing:

  • Rates are typically higher. As of mid-2025, prepaid plans on Power to Choose commonly show effective rates between 14 and 18 cents per kWh at 1,000 kWh usage, compared to 11 to 13 cents per kWh for competitive fixed-rate 12-month plans (powertochoose.org). That gap adds up to $30 to $60 per month for an average household.
  • Service can be interrupted quickly. Most prepaid providers will disconnect service when the balance drops to zero, sometimes within 24 to 48 hours of a low-balance alert. A customer who travels or forgets to reload could lose power.
  • No long-term price protection. Because there is no contract, the provider can change the per-kWh rate with limited notice.

Prepaid makes the most sense as a short-term solution, not a permanent arrangement. Once a customer establishes 12 months of on-time payments with a prepaid provider, that payment history can qualify them for a deposit waiver with a standard fixed-rate provider.

Path 3: Shop Providers That Waive Deposits by Policy

Some REPs have made a business decision to eliminate deposit requirements entirely as a competitive differentiator. Chariot Energy, for example, has publicly stated a no-deposit policy for residential customers regardless of credit score. Rhythm Energy and Pulse Power have offered similar no-deposit enrollment in certain plan tiers.

These policies can change, so the correct approach is to filter results on Power to Choose (the official PUCT comparison tool) by "no deposit required" using the plan filter, then read each provider's Electricity Facts Label (EFL) carefully before enrolling. The EFL is the standardized disclosure document that every Texas provider is required to publish; it lists all fees, the energy charge, and deposit terms.

A few things to check on the EFL before signing up:

  • Is there an early termination fee? If yes, how much? Common fees range from $75 to $200.
  • What is the average price per kWh at 500 kWh, 1,000 kWh, and 2,000 kWh? The rate often changes at each usage tier because of bill credits that only apply at certain consumption levels.
  • Are there base charges or minimum usage fees that apply even when consumption is low?

When Switching May Not Be Worth It

If a customer is currently mid-contract with a fixed-rate plan and the early termination fee exceeds the savings from switching, staying put is usually the smarter choice. Similarly, a customer nearing the end of a 12-month prepaid history should consider waiting out those final months to qualify for a deposit waiver rather than locking into a new prepaid contract that resets the clock.

The PUCT's Power to Choose website allows any customer to enter their zip code and compare current offers side by side. Running that comparison before making any move costs nothing and takes about ten minutes.

What Happens to a Deposit Already Paid

Under PUCT rules (§25.478(e)), a provider must return a deposit plus accrued interest after a customer demonstrates 12 consecutive months of on-time payments. The interest rate is set annually by the PUCT; for 2024 it was 0.55 percent. The deposit is also returned when the customer closes the account, provided the final bill is paid in full.

Customers who believe a deposit was improperly held or not returned can file a complaint at no cost through the PUCT's online complaint portal at puc.texas.gov.

A Straightforward Decision Path

To summarize the options without unnecessary complexity:

  1. Check whether a legal waiver applies (military, age 65+, prior payment history, co-signer). If yes, request the waiver before signing up.
  2. If no waiver applies and the goal is to start service immediately with no upfront cost, choose a prepaid plan and treat it as a 12-month credit-building step.
  3. If no waiver applies but a customer wants a traditional contract, filter Power to Choose for providers with published no-deposit policies and verify terms on the EFL.

Deposits in the Texas electricity market are governed by clear rules, and the paths around them are real. A customer who understands the system has more options than one who simply accepts the first quote they receive.