Texas 3 electric rates

Why Does Texas Have Three Electricity Rates?

  • Written By: Shannon Bedrich
  • Edited By: Rebecca Bridges

  • If you are shopping for electricity based on one of the three electricity rates shown on the Electricity Facts Label, stop. You might pick the electricity company advertising the lowest rate based on 500 kWh, 1000 kWh or 2000 kWh. But you could soon discover it’s not as straight forward as you’d hoped. Because 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.  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.

    The crazy part? None of these are the average electricity bill in Texas. The average electricity usage is 1200 kWh per month. The math on the electricity rate can be complicated, It’s important to read the details on energy plans to make sure it’s right for your home.

    What do the Three Electricity Rates Mean?

    The three electricity rates on the EFL are the average price per kWh for 3 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 how to read an EFL, you really don’t know what you’ll be paying for electricity.

    But you don’t have to do the math. 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.

    Shopping tip: 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 X.” When you are shopping for a new electricity plan at renewal, compare that price to the various offers, using the same number of kilowatt hours you used during that billing month. Don’t shop based on 500, 1000 or 2000 kWh if that’s not what you use.

    Shop for Electricity Based on Your Usage (not 500, 1000 or 2000 kWh)

    You don’t use exactly 500 kWh, 1000 kWh or 2000 kWh. And if you shop based on those levels, you may pick the wrong electricity plan for your hoem.

    Instead, enter your specific monthly average electricity usage and shop based on what you use.

    We’ll calculate the price per kWh and estimated bill for you at 500, 1000 and 2000 kWh and every number in between. (We’ll even calculate your estimated electricity bill if you use more than 2000 kWh a month.)

    Just enter your average monthly usage in the Electricity Bill Calculator.

    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.

    Here’s what to look for under advanced search.

    electricity bill calculator texas

    And instantly, all of the plans updated to show YOUR price per kWh, based on YOUR usage. Plus the estimated bill for each plan. We make it easy to find the best rate.

    Each plan has a one line description to highlight any unusual features. These may include 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.

    Shopping tip: Watch out for a Texas Teaser Rate. A teaser rate is one that looks great at a certain usage level, whether that’s 1000 kWh vs. 2000 kWh. But when you know how to read the Electricity Facts Label, you’ll see the tiered rates, bill credits and other gimmicks that go into the rate. Shop “Basic Electricity Rates” to avoid gimmicks. We also clearly identify if a plan is tiered, flat bill, bill credit or basic electricity.

    Shop Texas Electricity Rates by Zip and Usage

    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!

    About Shannon Bedrich

    Shannon Bedrich, co-founded ElectricityPlans in 2016 after shopping for electricity rates using a confusing state-sponsored website. A CPA and our CFO, Shannon is the one that deciphers the fine print on each electricity plan. Outside of work, Shannon enjoys spending time with family, rooting for the Aggies, and exploring all that Houston has to offer.

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