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Houston Texas Electricity and How It Works

Updated: 10/25/2022

Whether you’re new to Houston or are a lifelong resident, it’s imperative to have an affordable electricity plan. People spend an average of $135 per month on electricity throughout Texas. However, depending on the electricity plan and company you choose, you can either be above or below this monthly average.

Before finding the best electricity plan, you must first understand how electricity works in Texas. Texas floats its own boat in many respects, and its electricity market and plan structure are no different. This article aims to give you a crash course on how electricity works in Texas and how to find the cheapest power in your area.

Why is the Electricity Market so Complicated in Texas?

The reason that there are so many different electricity companies and rates in Texas is because of deregulation. Deregulation happened in the early 2000s and effectively gave residents of Houston and all of Texas the power to choose their own electricity plan and provider. Until then, Texans were forced to select a plan from whatever power company was closest to them.

While deregulation is a blessing in the fact that it opened the doors for dozens of new electricity companies to open and created a competitive market, it also makes it very difficult to choose the right provider. Depending on where you live, you might have access to dozens, if not hundreds, of electricity companies. Researching each company and the various plans they offer can take hours or days.

Where Does Electricity Come From in Texas?

While the electricity market is different in Texas than in many other areas, its origin is the same.

Fossil Fuels

Over 80% of the electricity in Texas comes from fossil fuels such as coal, oil, and natural gas. These fossil fuels are broken down by power-generating plants so that electricity can be created.

Wind Farms

While most of the electricity in Texas comes from fossil fuels, we also have more wind farms that produce electricity from wind than any other state in the country. In fact wind accounts for more than four-fifths of the electricity generated from renewable resources in Texas.

Solar Panels

Wind farms are the number one source of renewable energy in Texas, but solar panels are rapidly gaining. Solar panels have the ability to harness energy from the sun, which then gets converted into electricity. Solar energy accounts for about 3% of all electricity generated in Texas, but Texas ranks sixth in the nation in solar power potential.

Nuclear Power

Strides are being made to reduce the number of nuclear power plants in the United States. However, to date, between 10% and 15% of the electricity in Texas comes from nuclear power plants.

How Does Electricity Make It to My Home or Business?

The route that electricity takes to get to your home is nearly as confusing as the electricity market itself. There are three main players when it comes to delivering power to your home.

Power Generating Plants

Power generating plants are the companies that create electricity in the first place. These entities constitute wind farms, solar farms, nuclear power plants, and gas and oil companies. Essentially, any company that makes electricity out of something is considered a power-generating plant.

Retail Electric Providers

Retail Electric Providers (REPs) are the companies that you actually buy electricity from. REPs purchase power from power-generating plants at wholesale value and sell it to you, the customer, at retail cost. These are the companies that offer electricity plans and to whom you pay your monthly bill.

There are currently more than 130 REPs in Texas, and the number is rapidly growing. Because each of these companies offers as many as ten electricity plans, there are hundreds, if not thousands, of plans to choose from. Enter your ZIP Code in the free Rate Comparison Tool at the top of the page at ElectricityRates.com if you’re at your wits end with finding the right plan and want to use our comparison tool to help.

Utility Companies

While REPs sell you electricity, they aren’t the ones who deliver it to your home or business. That job falls to utility companies known as Transmission and Distribution Utilities (TDUs). TDUs manage and maintain the power lines, electric poles, electric meters, and power cables that take electricity from power-generating companies to you. They work in conjunction with REPs to ensure you have constant, uninterrupted power. They’re also responsible for repairing damage during power outages. CenterPoint Energy services over 2.5 million residents in the greater Houston area as the utility provider.

How are Electricity Rates Determined?

Because of deregulation, it’s up to each individual power company to determine its own electricity rates. Also, because of deregulation, power companies can’t simply jack up the price to whatever they want it to be. If they do, customers will simply opt out of their contracts and find a better one with cheaper rates.

While it’s ultimately up to each company as to what their rates are, certain factors can have an impact.

  • During extremely hot or cold times, rates tend to be higher because of the high demand for electricity.
  • In rural areas, electricity tends to be slightly higher because there are fewer companies and less competition.
  • REPs have various perks, benefits, and time periods where electricity rates are lower or higher depending on the time of day and week you use it.

While rates fluctuate and prices go up and down, ElectricityRates.com can help you find the best, most consistent plan available. Enter your ZIP Code in the free Rate Comparison Tool at the top of the page to compare rates and find the best option!

How to Find the Best Electricity Rates in Houston Texas?

The key to finding the best electricity plan in your area is to look for it with ElectricityRates.com. We have an electricity comparison tool that uses your zip code to find all the electricity plans in your area. We compare all the plans from over 30 different REPs and lay them out in a way that's easy to understand. While choosing your plan is ultimately up to you, we make it as easy as possible to make the right choice. Enter your ZIP Code in the free Rate Comparison Tool at the top of the page to make the switch to a better electricity company and start saving money today!