How Texas Electricity Rates Work

The Basics of Electricity Pricing

Your electricity bill in Texas is made up of several parts, but they all boil down to one number: the price you pay per kilowatt-hour (kWh). A kWh is a unit of energy. If you run a 1,000-watt appliance for one hour, that is 1 kWh.

The average Texas home uses about 1,100-1,200 kWh per month, though this swings dramatically by season. Summer months can push well past 2,000 kWh due to air conditioning.

What Goes Into Your Rate

Every electricity plan includes some combination of these cost components:

Energy charge — This is the per-kWh cost from your Retail Electric Provider (REP) for the actual electricity. It is the part that varies from plan to plan.

TDU delivery charges — Your local Transmission and Distribution Utility charges a monthly fee plus a per-kWh fee to deliver electricity to your home. These charges are regulated by the state and are the same regardless of which REP you choose. For example, Oncor’s delivery charges include a fixed monthly fee around $3.42 plus a per-kWh rate.

Base charges — Some plans include a flat monthly fee on top of everything else. A $9.95 base charge adds about 1 cent per kWh if your home uses 1,000 kWh that month, but only half a cent per kWh if you hit 2,000 kWh.

Bill credits — Many plans offer a credit (like $50 or $75) if your monthly kWh falls within a specific range. These credits can make the effective rate look very low at one level and much higher at others.

The 2,000 kWh Trick

Here is something every Texas electricity shopper should know. The Electricity Facts Label (EFL) shows you the average price at three levels: 500 kWh, 1,000 kWh, and 2,000 kWh. Some REPs design plans that look extremely cheap at the 2,000 kWh level by loading the plan with a large base charge and a big bill credit that kicks in near 2,000 kWh.

The math might look like this:

• Energy charge: 8 cents per kWh
• Base charge: $14.95 per month
• Bill credit: $75 at 1,001-2,000 kWh

At 2,000 kWh, the credit wipes out the base charge and then some, making the rate look like 10.5 cents per kWh. But at 500 kWh, you get no credit, the base charge hits hard, and the effective rate jumps to over 14 cents per kWh.

How to Compare Plans the Right Way

The best way to compare plans is to look at the EFL price at the kWh level closest to what your home actually needs in a typical month. Here is how to figure that out:

1. Check your last 12 months of bills. Your TDU meter data will show exactly how many kWh your home used each month.
2. Find your average. Add up 12 months and divide by 12 for a rough average. But also look at your summer peak — that is when your bill matters most.
3. Compare at the right level. If your average is 900 kWh, focus on the 1,000 kWh column. If your summer months hit 2,000+ kWh, check that column too.

Fixed vs. Variable Pricing

Fixed-rate plans lock in your per-kWh energy charge for the length of the contract. Your total bill still changes month to month because you use different amounts of electricity, but the rate stays the same.

Variable-rate plans can change every month. They might be lower than fixed rates some months and much higher in others, especially during summer.

The Bottom Line

Understanding how Texas electricity rates work puts you in control. Look past the headline number, check the EFL at the kWh level that matches your home, and watch for base charges and bill credits that shift the real cost.