Moving to Texas? Here's How Electricity Works

It’s Different Here

If you’re coming from most other states, you’ve probably never thought about who sells you electricity. You had one company, they sent a bill, end of story.

Texas doesn’t work that way. About 85% of the state is deregulated, which means you get to pick who sells you electricity. There are over 100 retail electricity providers competing for your business, and the price difference between a good plan and a bad one can easily be $50-80 per month.

That’s the good news: competition means lower prices and more options. The bad news: nobody teaches you how to navigate it, and some providers count on that confusion.

How the Texas Electricity Market Works

The Texas electricity system has three separate parts. Understanding them makes everything else click.

Generation is where the electricity comes from. Power plants — natural gas, wind, solar, nuclear — produce electricity and sell it on the wholesale market. You never interact with this directly.

Transmission and distribution is how electricity gets to your home. Your TDU (Transmission and Distribution Utility) owns and maintains the power lines, poles, and meters in your area. Texas has five TDUs: Oncor (Dallas-Fort Worth), CenterPoint (Houston), AEP Texas (Corpus Christi, parts of South and West Texas), TNMP (parts of Central and East Texas), and LP&L (Lubbock). You can’t choose your TDU. It’s determined by your address, like your water company.

Retail is the part you choose. Retail electricity providers (REPs) buy electricity wholesale, package it into plans, and sell it to you. They handle your billing, customer service, and the rate you pay. This is the only part of the system where you have a choice.

When you switch providers, nothing physical changes. The same wires deliver the same electricity. The only difference is who sends you the bill and what rate they charge.

Picking Your First Plan

Here’s where most newcomers to Texas get tripped up. There are hundreds of plans available in any given ZIP code, and they’re not all created equal.

Fixed vs. variable rate. A fixed-rate plan locks in your per-kWh price for the length of the contract (usually 12-36 months). A variable-rate plan can change every month based on market conditions. For most people, fixed-rate is the safer bet. Texas summers are expensive, and a variable rate can spike hard in July and August when wholesale prices surge.

Contract length. Most fixed-rate plans run 12, 24, or 36 months. Shorter contracts give you flexibility. Longer contracts sometimes offer slightly better rates. A 12-month plan is a solid starting point — it lets you learn how much electricity your home actually uses before locking in for longer.

Early termination fee (ETF). If you leave a fixed-rate contract early, you’ll typically pay $100-200. Some plans have no ETF. Factor this in, but don’t let it scare you away from a good plan. If switching saves you $40/month, that $150 ETF pays for itself in under four months.

The rate that matters. This is the single most important thing to understand. Providers advertise their rate at 2,000 kWh because it’s the lowest number on the Electricity Facts Label. But the average Texas home uses about 1,200 kWh per month. At lower levels, the rate is often significantly higher because of how base charges and bill credits work. Always compare plans at the amount your home actually uses, not the advertised number.

What to Watch Out For

Texas has plenty of honest providers offering good plans. But some common plan structures deserve extra scrutiny.

Bill credits. Some plans offer a credit — say, $75 off — if you use more than 1,000 kWh in a month. Sounds great. But if you use 999 kWh, you get nothing and your effective rate skyrockets. These plans create a cliff: they’re cheap above the threshold and expensive below it. If your home consistently uses well above the credit threshold, they can be a good deal. But if you’re anywhere near the edge, they’re a gamble.

Tiered pricing. Some plans charge one rate for your first 500 kWh and a different rate after that. The tiers can work for or against you. Read the Electricity Facts Label to understand exactly how the tiers break down.

Free nights and weekends. These plans give you free electricity during certain hours but charge a premium the rest of the time. They only work if you can genuinely shift most of your electricity consumption to off-peak hours. For most families, that’s not realistic. Your AC runs when it’s hot, not when it’s convenient.

Auto-renewal. When your contract ends, most providers automatically roll you onto a month-to-month variable rate that’s 30-50% higher than what you were paying. Set a calendar reminder 30 days before your contract expires and shop for a new plan. This is one of the easiest ways to save money in Texas.

Getting Connected

Setting up electricity at your new Texas home is straightforward. Here’s the step-by-step process.

Step 1: Find your ZIP code and move-in date. You’ll need both to start shopping. If you know your new address, even better — it’ll help identify your TDU and show plans available in your exact area.

Step 2: Compare plans. Enter your ZIP code on ChooseMyPower.org to see available plans. Set the comparison to approximately how much electricity you expect your home to use. If you’re not sure, 1,000-1,200 kWh is a reasonable starting point for an average Texas home.

Step 3: Pick a plan and enroll. Once you find a plan that fits, click to enroll. You’ll provide your name, address, move-in date, and social security number (for the credit check). The entire process is online and takes about 5 minutes.

Step 4: Your new provider handles the rest. They’ll coordinate with your TDU to set up service at your address. In most cases, electricity is connected within 1-2 business days. Some move-ins, especially for addresses that haven’t had active service recently, may require a physical meter activation, which can take a bit longer.

Step 5: Check your first bill. When your first bill arrives, review the rate and make sure it matches your Electricity Facts Label. This is also a good time to see how much electricity your home actually uses so you can compare plans more accurately in the future.

That’s it. No calling the utility company. No waiting on hold. No technician visit in most cases. Welcome to Texas.