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How Can I Learn About the Cost of Electricity in Texas?

cost of electricity in Texas

Many new residents to Texas are unfamiliar with deregulation. Since most states only have utility companies taking care of the electricity needs of its residents, it's easy to get overwhelmed by the energy choice the Lone Star State offers its citizens.

It's simpler than you think. Instead of talking to one company that provides the same rate to everyone - a rate they choose - various companies compete for energy and customers in the open market. This means that there can be a different cost of electricity in Texas, and it's determined by each retail electricity provider (REP) independently.

What Does This Mean for You?

When searching for the best energy rate for your home, you have the ability to pick the company that you feel best meets your needs. And for most people, this means looking for the lowest possible rate per kWh that we can find. However, when you visit a company's website, you're faced with a daunting collection of plan names and kWh rates instead of a single rate for a single company. How can a given company offer rates that differ wildly from its competitors and even its own plans?

In layman's terms, each REP buys energy in given amounts across different given time frames. Thus, the price per kWh for a 3-month plan negotiated by the company could be much higher (or lower) than the price per kWh for a 24-month plan, simply because of the differences in short-term and long-term demand in the energy market. And much like the stock market, the cost of electricity in Texas can depend upon the ability of a company to purchase energy when it can and in the amounts needed to keep its customers in power at all times.

Let's set aside the fact that this is also done in 15-minute increments as energy market demand fluctuates in real time as details that are a bit too technical for the conversation at this point.

The Difference Between Supplying and Delivering Electricity

However, there's one important aspect to this price that some people don't understand - the cost of bringing that electricity to you. Under deregulation in Texas, the company that delivers the electricity to your home and/or business is not the same as the company that supplies the electricity. Specifically, there are 5 utility companies that serve the deregulated areas of Texas. Also known as a Transmission and Distribution Service Provider (or TDSP), each utility company delivers electricity only to the customers in its service area, along with owning, maintaining, and reading the lines, poles, and meters for that area.

Conversely, the supply of the electricity to the TDSP is performed by the retail electricity provider. When you buy electricity for your home or business, you are purchasing it from a REP, but it's the TDSP that transmits and distributes electricity to you, and they charge you to do so.

What This Means on Your Texas Electricity Bill

When you look at your Texas electricity bill, you probably see a line-item charge typically described as "TDU Fees." This is the charge the TDSP for your area assesses to make sure you get the energy you've purchased from the REP. Some companies bundle the TDU Fees into the rate it charges per kWh, while other companies keep the TDU Fees separate in its billing system so customers can know who is charging them specifically and for how much.

Thus, the cost of electricity in Texas is based upon two key factors:

  1. The price at which a REP buys energy to sell to the consumer; and
  2. the costs assessed by the TDSP to bring that energy to your home or business.

When you are searching aggregator sites like Texas Electricity Ratings or Power to Choose - or actually visiting an REP's own website - it's important to consider the right information when determining which company is right for your needs. We also recommend you examine the Electricity Facts Label (EFL) for each plan that interests you, as better companies will provide consumers a clear picture of what it charges you for energy and the charges the TDSP will assess to bring you that energy.

Ultimately, being new to the best state in America doesn't mean that you shouldn't be able to secure the right Texas electricity plan for your home or business.

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