Texas, like many other states in the US, has deregulated electricity. As a result, the energy market is open and highly competitive in Houston and consists of over 130 electricity companies that all aim to make you their newest customer. While having the power to choose your own electricity company is great freedom, it can also be a headache.
The reason for the headache is because of the sheer amount of electricity companies and plans you have to choose between. Doing your own research to find the best electricity rate in Houston will take hours, if not days. However, when you Enter your ZIP Code in the free Rate Comparison Tool at the top of the page at ElectricityRates.com, we make finding the right electricity plan with the best rates as easy as possible.
Table of Contents
How are the Electricity Rates Determined in Houston?
Because the power grid in Texas is deregulated, it’s mainly up to each individual retail electric provider what they want to set their rates. However, they can’t go overboard with outlandishly high rates because of how competitive the market is. If they do, their customers will start looking for cheaper rates from other companies.
If you’re currently trapped in an electricity plan with high rates, you should Enter your ZIP Code in the free Rate Comparison Tool at the top of the page at ElectricityRates.com, and we’ll show you all the electricity companies, plans, and rates in your area. You can then make an informed decision about which plan is right for you and make the switch to start saving money!
What are Things That Affect Your Electricity Rate?
Here are some of the main things that determine how high or low electricity companies will set their rates.
The Delivery Fee
While you purchase electricity from a retail electric provider, they aren’t the company that delivers it to your home. That job falls to your local utility company (TDU), which is responsible for managing the power lines, poles, electric meters, and underground cables that bring electricity to your home or business. Your REP has to pay the utility company for their services and typically factor the cost into your electricity rate.
Time of Year
During certain times of the year when the temperature is extremely hot or cold, electricity rates tend to be higher because of higher demand than usual.
If you live in a large city such as Houston, Dallas, or Fort Worth, there’s more competition which usually leads to lower rates. If you live in rural areas, however, you don’t have as many options, which means that the companies serving your area can jack the prices up.
The Cost of Purchase
Just as REPs don’t deliver electricity to your home, they also don’t create it in the first place. Instead, they purchase electricity from power-generating plants and generators and then sell it to you at resale value. Your rate will be higher or lower depending on how much your REP had to pay for the electricity.
Does Your Type of Electricity Plan Affect Your Rate?
Another thing that plays a role in determining your electricity rate is the type of plan you have. In general, there are four different types of electricity plans, and they will all affect your rate differently.
With prepaid electricity plans, you pay for electricity before you use it. Because you’re paying upfront, there’s no risk to your retail electric provider that you won’t be able to pay your bill. As a result, you won’t have to do a credit check or make a deposit. This convenience and the fact that you can switch plans at the end of each month make prepaid plans very popular.
However, prepaid plans also tend to have higher rates than other plans. The higher rates are because prepaid plans usually get purchased by people who don’t have any other options or who aren’t sure what they want to do for a permanent electricity solution. They can also get expensive because if you use more than your allotted electricity, there’s often an upcharge to purchase more.
Flat-rate plans are similar to prepaid plans because you pay for electricity at the beginning of the month. However, they differ because you pay a flat rate regardless of how much electricity you use. Let’s say, for example, that your flat rate is $150. You’ll pay that amount if you use 500 kilowatt-hours of electricity or 2,000 kilowatt-hours.
Before you get too excited, you should know that REPs are very deliberate when setting your monthly flat rate. They base the rate on your monthly energy usage from previous months and put it safely above your average use to ensure they don’t get ripped off. In most cases, you end up paying much more for a flat-rate electricity plan than you should.
Variable-rate plans are where your electricity rate changes from month to month depending on the status of the electricity market. It’s like playing the stock market in that your rate could go up or down with little warning. Variable-rate plans are unpredictable and could either save or cost you big bucks.
Fixed-rate electricity plans are the most popular type of plan in Texas. They typically require a credit check, a deposit, and the signing of a long-term contract. However, they usually have lower rates than other types of plans and are much more stable because your rate won’t change during the duration of your contract.
How to Find the Lowest Texas Electricity Rates
If you think that a fixed-rate contract is the best option for you, Tiler our AI-powered Rate Assistant is the best way to compare Texas electricity rates and find a plan that's tailored to your home and usage. With Tiler, you can be confident you're getting the best deal on your electricity. If you’re looking for an easy-to-use site that provides all the information you need to make an informed decision about your electricity provider, look no further than Electricityrates.com. While fixed-rate plans have set rates that don’t change according to the electricity market, they may change based on how much electricity you use.
As a result, it’s important that you know your average monthly energy usage when signing up for an electricity plan. It's also important to know what all your options are so that you can accurately and easily compare plans. ElectricityRates.com can help with both of these obstacles and get you started on the path to massive savings.