Texas Electricity Market Terms You Should Know

The Basics

These terms are essential in becoming an educated electricity consumer in Texas. Learning these terms will help you understand your electricity bill and find cheaper electricity plans for your home.

Average Billing

Also referred to as budget billing, this billing alternative provided by Retail Electricity Providers (REPs) assists customers in managing their energy expenses. Instead of experiencing fluctuating bill amounts based on monthly electricity usage, customers pay a consistent amount each month, determined by averaging their past usage history. For more information, see our blog “What Is Average Billing?”.

Competitive Energy Market

An energy market where homeowners choose their own electricity provider. Most of Texas is a competitive energy market. For more information, see our blog “Unlocking Texas Power: Deregulation Demystified”.

Effective Rate

Your “all-in” rate is the total amount paid per kWh, including all bill charges such as electricity delivery charges, energy charges, and various taxes. For instance, your energy charge might be 7 cents per kWh, but with delivery charges and taxes added, your effective rate becomes 11 cents per kWh. For more information, see our blog “How to Choose the Perfect Electricity Plan in Texas”.

Electricity Delivery Charges

Charges levied by Transmission Distribution Service Providers (TDSP or TDP) to cover the costs of physically delivering electricity from the plant to your property. These fees support the maintenance of transmission poles, electrical wires, and other infrastructure essential for power distribution.

Electricity Grid

Commonly referred to as “the Grid,” the Texas Interconnection is a power transmission system managed by ERCOT and regulated by the PUCT. Unlike the Eastern Interconnection and the Western Electricity Coordinating Council, it operates independently without synchronous connections to either.

Electricity Management

An individual or organization that manages all interactions with electricity providers, including payments, contracts, and any related issues.

Electricity Usage

The amount of electricity consumption a household or business uses to power their property.

Energy Broker

An individual or organization that procures electricity rates for their clients.

Fixed Rates

A fixed-rate electricity plan is an energy pricing structure where the cost per kilowatt-hour (kWh) remains constant throughout the duration of the contract. This means that regardless of fluctuations in the market price of electricity, the rate you pay for each kWh will not change. Fixed-rate plans provide predictability and stability in your electricity bills, making it easier to budget for energy expenses. These plans typically range from a few months to several years in length. For more information, see our blog “How to Choose the Perfect Electricity Plan in Texas”.

Move-In Request

A formal request submitted by a customer to start electricity service at a premises.

Move-Out Request

A formal request submitted by a customer to stop electricity service at a premises.

PowertoChoose.org

A government-owned electricity shopping website intended to help Texans find electricity plans.

Prepaid Plans

A plan where you pay in advance for electricity before using it. Typically, these plans are pricier compared to standard ones. While prepaid plans can facilitate quicker activation, they also carry the risk of sudden disconnection if your account balance drops below a certain threshold. For more information, see our blog “What Is Prepaid Electricity?”.

Rate Structure

This describes how your electricity rate is calculated. In Texas, electricity supply plans usually follow fixed rate structures and variable rate structures. For more information, see our blog “How to Choose the Perfect Electricity Plan in Texas”.

Smart Meter

A smart meter is an advanced type of electricity meter that records energy consumption every 15 minutes and communicates this information to the utility company and the consumer.

Solar Buyback Plans

An electricity plan enabling customers to earn credits on their electricity bill by selling excess energy generated by their home’s solar panels back to the electricity grid.

Switch Request

A formal request submitted by a consumer to change their electricity provider at their home.

Switchhold

A restriction placed by an electricity provider or utility company that prevents the customer from switching to a different electricity provider. This hold is typically implemented for reasons such as contractual obligations, unpaid balances, or tampering with your meter or other electrical equipment.

Teaser Rate

A rate that appears inexpensive for specific usage levels, but incorporates tiered rates, bill credits, or a fixed bill amount, ultimately resulting in higher costs than initially perceived. For more information, see our blog “How to Choose the Perfect Electricity Plan in Texas”.

Temporary Meter

An electricity meter that is used during the construction of a property. Once the construction is complete, a new, permanent meter is installed.

Variable Rates

A variable rate electricity plan is an energy pricing structure where the cost per kilowatt-hour (kWh) can fluctuate based on changes in the market price of electricity. Unlike fixed-rate plans, the rate you pay can increase or decrease each month, depending on factors such as supply and demand, fuel costs, and weather conditions. Variable rate plans offer flexibility and the potential to benefit from lower prices when market conditions are favorable, but they also carry the risk of higher rates when market prices rise. For more information, see our blog “How to Choose the Perfect Electricity Plan in Texas”.

Industry Acronyms

There are many acronyms used in the vocabulary of the Texas electricity market. Below are examples of these acronyms and what they stand for.

Electric Cooperative (CO-OP)

A private, non-profit organization that delivers electricity to its customers or members. While most of Texas operates within a competitive electricity market, certain CO-OP areas remain non-competitive. Homeowners in these CO-OP areas cannot choose their own electricity provider.

Electricity Facts Label (EFL)

A document detailing the specific aspects of a Texas electricity plan, such as the price, contract duration, and associated fees. For more information, see our blog “How to Read an Electricity Facts Label (EFL)”.

ERCOT System

The power system regulated by the Public Utility Commission of Texas that operates independently, without synchronous interconnections to the Eastern Interconnection or the Western Electricity Coordinating Council.

Electric Reliability Council of Texas (ERCOT)

A nonprofit organization that manages the flow of electric power to more than 26 million Texas customers. Its responsibilities include ensuring the reliability of the electrical grid, facilitating competitive wholesale and retail electricity markets, and overseeing system operations and planning.

Federal Energy Regulatory Commission (FERC)

An autonomous entity within the United States government tasked with overseeing the interstate transmission and wholesale trade of electricity and natural gas. Additionally, FERC regulates the pricing of petroleum transport across state lines via pipelines.

Kilowatt-Hour (kWh)

A unit of energy measurement that represents the amount of electricity consumed over time. Specifically, one kWh equals the energy used by consuming 1,000 watts for one hour. It is commonly used by electric utilities to calculate and bill for electricity usage. For example, if you run a 100-watt light bulb for 10 hours, you would use 1 kWh of electricity. For more information, see our blog “What Is a Kilowatt-Hour (kWh)?”.

Municipally Owned Utility (MOU)

A public service provider owned and operated by a local government, supplying essential services such as electricity or water to residents within its jurisdiction. They are governed by local officials or boards appointed by the municipality and are accountable to the local community. These utilities often prioritize local needs and interests and may offer competitive rates and more direct control over service provision.

Megawatt Hour (MWh)

A unit of energy measurement that represents the amount of electricity used or generated over one hour. Specifically, one MWh equals 1,000 kilowatt-hours (kWh) or 1,000,000 watt-hours. It is commonly used to describe large-scale electricity consumption or production, such as that of power plants or large industrial facilities. For example, if a power plant generates 1 megawatt of electricity continuously for one hour, it produces 1 MWh of energy. In the international scientific community’s official measurement system, one MWh is also equal to 3.6 gigajoules (GJ).

Provider of Last Resort (POLR)

A Retail Electricity Provider that accepts customers under certain market conditions, usually when another goes out of business. The plans these new customers are placed in are almost always more expensive than the average electricity plans available at that time.

Public Utility Commission of Texas (PUCT)

Oversees the regulation of electric, telecommunication, water, and sewer utilities across the state, enforcing relevant legislation and providing support to consumers in addressing their complaints.

Renewable Energy Credit or Certificate (REC)

Represents the environmental benefits of one megawatt-hour (MWh) of electricity generated from a renewable energy source, such as wind, solar, or hydro power. RECs are tradable commodities that certify the bearer owns a certain amount of renewable energy. They provide a way for businesses and individuals to support renewable energy generation and claim the associated environmental benefits, even if they cannot directly use renewable energy themselves. By purchasing RECs, they can offset their carbon footprint and support the renewable energy market.

Retail Electricity Provider (REP)

A company that operates in regions of Texas where electricity sales are open to retail competition. These companies purchase electricity at wholesale prices, arrange for its delivery, set retail prices for customers, and actively seek out customers to purchase electricity at retail. For more information, see our blog “What You Need to Know about Retail Electricity Providers”.

Smart Meter Texas (SMT)

A service managed by the four major utilities in Texas. It monitors your electricity usage and offers a portal where you can view your past electricity consumption. Knowing your historical electricity usage allows for much better plan matching. Once your historical usage is obtained, this information will be used to create a forecast of what your electricity usage might look like for the next 12 months. This will help find the optimal plan for your household.

Transmission and/or Distribution Service Provider (TDSP) – or – TDU (Transmission/Distribution Utility) – or – simply “Utility”

TDSPs in Texas own and operate electricity transmission and distribution equipment (poles, wires, etc.) and facilities. These entities are regulated by the PUCT and are obligated to ensure fair and equal access to the electricity. Examples of TDSPs in Texas include CenterPoint, ONCOR, Texas-New Mexico Power, AEP North, and AEP Central.

Terms of Service Agreement (TOS)

A contract detailing fees, payment choices, and key terms that define your relationship with your REP.

Time of Use (TOU)

An electricity plan that adjusts your kWh rate based on the time of day when electricity is used. While initially enticing, these plans often turn out to be more costly than anticipated.

Your Right as a Customer (YRAC)

A formal document explaining customer protections mandated by the PUCT.

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