Texas 3 electric rates

Why Does Texas Have Three Electricity Rates?

If you’re shopping for cheap electricity plans in Texas, you might decide to pick the company that advertises the lowest rate. Makes sense, right?

But wait, you soon discover it’s not as straight forward as you’d hoped. There are separate electric rates for 500 kWh, 1000 kWh, 2000 kWh. And unless you read the find print you may choose the wrong plan.  

Before you blindly click on the plan with the lowest advertised rate, read this article.

Why Three Electricity Rates for Each Plan?

Texas was an early adopter to deregulated retail electricity and it has been very successful.  The Public Utility Commission of Texas (PUCT) developed a strict set of rules and requirements for retail electricity providers (REPs) to follow.

One of the rules is that every REP must disclose an Electricity Facts Label (EFL) for every plan they offer. The information on the EFL also follows a specific set of requirements set forth by the PUCT which includes displaying the average price per kWh for 500 kWh, 1000 kWh, and 2000 kWh usage levels. As a result, Texas electricity providers are required to display three electricity rates.

What do the Three Electricity Rates Mean?

The three electricity rates on the EFL are the average price per kWh for the most common usage levels: 500 kWh, 1000 kWh, and 2000 kWh.

These rates are not unit prices and they do not correspond to a range of energy usage.

These rates are the price you would pay per kWh if you happen to use that exact amount of electricity in one billing period, which is nearly impossible.

Texas is unique in the way that electricity customers are billed by their electric providers. The REPs bill customers for both the electricity used (energy charge) and the delivery of the electricity (utility charge). The combination of the energy charge, the utility charge, as well as any monthly base charge is the average price per kWh.

For each electricity plan, the provider will sometimes show the energy charge and the utility charge separately, and sometimes they will combine the two and call it a bundled energy charge.

To make things more confusing, the providers may advertise the 500 kWh, 1000 kWh, or 2000 kWh average price per kWh or the bundled energy charge, and you have to read the fine print to figure out which one it is. ¬†Until you dig down into the details of the EFL, you really don’t know what you’ll be paying for electricity.

ElectricityPlans.com makes it easy to shop based on your electricity usage. Just enter your monthly usage in our Electricity Bill Calculator. We’ll quickly calculate your estimated monthly electricity bill and your average rate.

Shop Basic No Gimmick Texas Electricity Plans

How Do I Choose the Right Electricity Rate?

The most important thing when choosing the right electric rate is knowing how much electricity you use. In Texas, your electricity usage may make dramatic swings between summer and winter. Understanding your peak usage in the summer, and also where you shake out the rest of the year will help you narrow your search for the perfect electricity rate.

When you get a better understanding of your electricity usage, you will be able to estimate your electric bill for any plan. The most important variable in calculating your electricity bill is your monthly kWh usage. 

Below we show why it can get complicated. But here’s the tip: we’ve added an Electricity Bill Calculator to our site so you don’t have to do the math! Just enter your average monthly usage and we’ll do the rest!

Typical Electric Bill Formula:

(Energy charge * kWh used) + (Utility charge * kWh used) + Fixed Utility charge + Base charge or minimum usage fee = Electric bill (before taxes or fees)


(Bundled energy charge * kWh used) + Base charge or minimum usage fee = Electric bill (before taxes or fees)

Average price per kWh Formula:

Electric bill / kWh used = Average price per kWh

The average price per kWh formula above is how electric providers calculate their 500 kWh, 1000 kWh, and 2000 kWh advertised rates.

Your electricity provider is required to put your average price on your electricity bill. It will usually say, “The average price per kWh you paid for electricity this month was XXXX.”

Navigating the Electricity Rate Minefield

Have you ever shopped for an electricity plan and one stands out with an unusually low rate for a particular usage level? Beware, because it is likely a plan that features a well-placed bill credit.

For instance, a $100 bill credit at 2000 kWh usage can drop the advertised average price per kWh dramatically. This advertised rate is not a unit price for electricity over 2000 kWh. While the bill credit may be beneficial to you, it can also mislead you into thinking that you get a fabulous low rate for energy usage over and above that level.

At ElectricityPlans.com we provide the tools to help you make the best informed decision about the right electricity plan for you.

You can refine your electricity plan search by standard usage levels: 500 kWh, 1000 kWh, and 2000 kWh.  The advertised electric rates will be apples to apples.

Want a better understanding of how a particular plan is priced? Easy.  Just click on the plan details and pricing link on the plan shopping page.

What You Will Find in Plan Details and Pricing

In the Plan Details and Pricing section, we’ve done the research for you.

Everything you need to know about an electricity plan is outlined in the plan details.

We’ll let you know any unusual features about the plan’s pricing such as bill credits, minimum use charges, or flat-fee electricity up to a certain usage level. We know finding the right electricity plan can be overwhelming, but we do everything possible to level the playing field and make sure you have the information you need to make an educated choice.

Image shows where to click the Plan Details and Pricing on each electricity plan.

You can access plan details on any plan by clicking the link:

Plan Details section gives you all the information on your plan

This opens up a section called Pricing Details, where we will help you understand what you are really buying.

Our latest feature is the Electricity Bill Calculator. Just enter your average monthly electricity usage. We’ll automatically recalculate all the rates for you. We’ll show your average monthly electricity price per kWh and your estimated electricity bill. And, we’ll re-sort all the plans to show the cheapest electricity rates for your home.

electricity bill calculator texas

PlanScan — We Shop For You

Still confused? We offer PlanScan, a free bill review and electricity plan recommendation service.

Submit a copy of your bill and tell us what you are looking for. We will review your usage and make custom recommendations for you. Then you simply click the link for the plan you want and complete the sign up.

Learn More About Electricity Shopping In Texas

We know that this can be confusing. That’s why we created ElectricityPlans.com to begin with. It’s also why we wrote The Definitive Guide to Electricity Shopping in Texas. Give it a read and you’ll understand more about shopping for electricity!

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