How Electricity Works in Texas

In the Texas deregulated energy market, three company types participate to help you flip your light switch: a light company, a utility company and a generator. Each has a different role, but all work together to keep power flowing to your home.

• Power generators: Produce electricity from wind, solar, coal or natural gas
• Retail energy providers (REPs): Purchase electricity in wholesale auctions, selling it to homeowners and business owners across the state
• Transmission and distribution utility companies (TDUs): Manage the local power grid, delivering energy across the state.
• You’ll work almost entirely with your light company. However, contact your utility if you’re dealing with a power outage. Often called “poles and wires” companies, utility companies manage the grid, including repairing blackout issues.

The Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) oversee the market to ensure fair competition and a consistent power supply.

While most Texas cities, such as Dallas and Houston, are deregulated, a few, including Austin and San Antonio, still have regulated markets.

Texas Utility Companies

Where you live in the state determines which utility company manages the grid in your area. The utility maintains power lines and delivers electricity to you. Below are the six key utility companies in deregulated areas of Texas.

• AEP Texas Central: Corpus Christi, McAllen, Victoria, Laredo, Harlingen
• AEP Texas North: Abilene, San Angelo, Vernon, Big Spring
• Texas-New Mexico Power: League City, Glen Rose, Pecos, Angleton, Lewisville, Texas City
• Oncor Electric: Dallas, Fort Worth, Irving, Arlington, Plano, Killeen, McKinney, Temple, Round Rock, Midland, Pflugerville, Odessa, Tyler, Waco, Wichita Falls
• Lubbock Power & Light: Lubbock
• CenterPoint Energy: Houston, Katy, Galveston, Pasadena, Sugar Land, Baytown, Missouri City

Renewable Energy Plans in Texas

You can choose from several green energy plan types in Texas without installing solar panels on your roof.

• 100% renewable plans: These plans promise electricity that’s 100% green. Most clean energy providers use power sourced from wind or solar farms. However, because these sources aren’t available on a round-the-clock basis, providers also offset your usage with renewable energy certificates (RECs). These plans allow you to lower your carbon footprint without the upfront cost of solar panels.
• Solar buyback plans: Solar buyback plans allow you to sell excess energy your solar system generates back to the power grid for an account credit. This plan can help you maximize your solar system investment while enjoying 100% green energy when relying on the power grid for electricity.
• Time-of-use plans: Some energy companies offer low rates during off-peak hours and higher rates during peak demand. For example, TXU Energy offers a Free Nights & Solar Day plan. This 100% renewable plan leverages solar energy during the day and wind at night. They’re best for solar homes with battery storage or people who can shift usage to the free period. Watch out: these plans typically charge very high rates during peak demand periods.
• Community solar plans: These allow you to subscribe to a shared solar farm and earn bill credits. Typically, you’ll earn credits equivalent to the amount agreed to in your share of the community solar farm. This plan type is a good option for those who can’t install their own panels.

Texas Renewable Energy Regulations and Incentives

Texas leads the U.S. in wind energy and is a major solar producer thanks to its many clean energy investments. While the state doesn’t offer many tax breaks for choosing green energy, most renewable plans now cost the same or less than fossil fuel options.

The Lone Star State set a renewable energy goal of 10,000 megawatts by 2025 and met it 15 years early in 2010. It also launched the Texas Emerging Technology Fund (TETF) to support renewable energy projects. The fund helped attract clean energy companies and boost innovation in wind, solar and battery storage across the state.

Texas doesn’t have a solar tax credit, but federal and local incentives can lower the cost of going solar. The federal solar tax credit alone can offset your solar panel costs by 30% as a credit on your income tax return. If you already have solar panels, you can earn bill credits through solar buyback plans that pay you for excess energy sent to the grid.

Switching to a Sustainable Energy Provider

Switching to a sustainable energy provider is as easy as going with a traditional energy provider. Many Texas electric companies now offer at least one renewable energy plan. 

When switching, we recommend starting the process at least 30 days before your current energy plan expires to ensure you have plenty of time to choose the right plan for your needs. You’ll also be able to schedule your enrollment so that your new plan starts before your old plan ends, avoiding an interruption in your power service.

Most renewable energy plans in Texas don’t feature any additional fees or costs compared to traditional plans. That said, some providers levy an extra charge for green energy, often in the form of a flat monthly fee ranging from $4.95 to $9.95. In most cases, these fees won’t be avoidable, but it’s good to be aware of them as a part of your total monthly energy costs.

Money-Saving Tips for Green Energy Consumers

One of the best ways to save money while staying green is to increase your home’s energy efficiency.

Bruce Stewart, president and chief executive officer of Perch Energy, shared one of his top tips. “Energy vampires are appliances that are likely to draw power even when not in use by going into a standby mode rather than completely powering down,” Stewart said. “Televisions, DVD players, microwaves, video game consoles and instant coffee are all examples of commonly used energy vampires.”

By cutting power to energy vampires, you may be able to significantly reduce your home’s total energy usage and save on electricity costs.

Installing a smart thermostat, smart plug, power strips and light bulbs are a few energy-efficient home upgrades to consider. “On average, U.S. households spend the most money on heating and cooling every month. Smart thermostats allow for optimized heating and cooling schedules, which allow you to heat or cool your home for less money,” Stewart said.

By combining smart home upgrades with small habit changes, you can lower your energy use and make the most of your green energy plan.

The Future of Sustainable Energy in Texas

Texas has invested heavily in renewable energy, becoming the U.S. leader in green energy through wind and solar power production. Projections indicate that Texas will continue to pursue both renewable energy infrastructure and fossil fuel energy supply.

While Texas already uses nuclear power for its grid — nuclear reactors power 10% of electricity in the Lone Star State— advances in nuclear power technology may mean increased reliance on this surprisingly clean and potent power source. Texas has two nuclear power plants, and the state is building a third in the coming years, according to the Texas comptroller.

According to the U.S. Energy Information Administration (EIA), Texas may see further investment in wind power and solar energy. EIA projections indicate that wind and solar power combined may reach a production level of over 100 gigawatts (GW), more than double the current capacity of these renewable energy sources.

While we can’t predict the future, one clear lesson from the past 20-plus years is that demand influences the market. The more customers seek out clean energy sources, the more Texas and its energy companies will invest in renewable energy.

Our Methodology for Rating the Best Energy Providers

We at the EcoWatch Reviews team interview customers, run focus groups, and speak with deregulated energy experts and company representatives. To gather first-hand data, we also surveyed more than 1,000 Texans who have purchased deregulated energy plans. The result of over 100 hours of study shapes our methodology for reviewing electricity companies based on the following categories:

• Sustainability score (25%): We assess a sustainability score for dozens of providers based on the variety of renewable energy or green energy options the companies offer. Providers who offer only 100% renewable energy plans will score the highest, while those who offer no 100% renewable energy plans will score the lowest. Companies can earn additional points for solar buyback plans and electric vehicle (EV) charging plans.
• Cost and bill predictability (25%): We base our cost ratings on a provider’s effective rate across all usage levels. This helps you identify the lowest effective rate — not just the cheapest advertised cost. Providers with lower rates score well; those who charge more earn fewer points. We rate bill predictability by determining rate variance at all usage levels. More variance means fewer points and lower variance earns more points.
• Plan features and options (25%): More options means more chances for you to find the right plan for your needs. Providers that deliver a range of plan types, from bill credit plans to savings plans and time-of-use plans, earn more points in our review. Providers with fewer options will score lower.
• Customer satisfaction (25%): We rate a provider’s customer satisfaction based on firsthand experience from customer surveys, as well as third-party review websites, such as the Better Business Bureau (BBB) and the Public Utility Commission of Texas (PUCT). Our team also goes through the online buying experience to assess the overall quality of the customer experience.

To learn more about how we rate and review retail energy providers, read our full deregulated energy methodology.