The average kilowatt-hour electricity rate (kWh price) for the US, compare to Texas

The cost of electricity in the Texas retail energy market is crucial to understand when deciding which retail electric provider is the best to go with. The cost per kilowatt-hour electricity rate may seem small, but the final electricity bill can easily reach a shocking total once all the fees and taxes are factored in. So what is a good kWh electricity rate? And what factors can change an electricity rate? Check out how the Texas electricity rate compares to the rest of the country and other deregulated states, and what factors impact the electricity rate in Texas.

How does the kWh electricity rate in Texas compare to the nation and other deregulated states?

The latest 2020 average retail price for electricity per kilowatt-hour (residential customer) is 11.74¢ in Texas, according to the US Energy Information Administration. Compared to the same time in 2015, Texas has seen that average increase by 2.71% while the rest of the country's average (13.98¢) increased by 3.59%. The deregulated states alone (in the list below) have had an average energy rate increase of 6.85%. The Lone Star state really shines when it comes to low energy rate prices!

Texas energy markets were deregulated in 2002 in order to help decrease the cost of electricity and gas. This increased competition and gave most Texans the freedom to choose their own electricity provider. Texas electricity prices increased well above the national average during the phase-in of the electricity deregulation, but this trend reversed in 2010, where electricity prices have gone back to their lower level below the national average.

How do electricity rates compare to past rates in Texas?

In 2002, Texas opened the electricity market to competition expecting that this would help to reduce prices. Consumers started to choose their own provider, but electricity prices increased above the national average between 2002 and 2010. Since 2011, however, Texas electricity prices have once again decreased below the national average.

Changes in electricity rates

A few factors come into play that impact the kWh prices charged to consumers:

 Cost of generation and delivery
Demand can significantly change the cost of generation and delivery. As consumers increase energy consumption while available resources decrease, the pressure on transmission equipment can easily overwhelm the generation process. New legislation and policy can also affect costs, along with an aging electrical infrastructure.
 Weather
The cost to generate and deliver electricity can vary based on the weather. Often Texans use more electricity in the summer, to power air conditioning units, and this spike in demand can increase the cost of electricity. Further, extreme weather events can damage generation and transmission equipment and increase the cost of getting electricity to the consumer.
 Time of day
During times of higher demand, the price of electricity per kilowatt-hour can be drastically higher than times of lower demand.

What does the price of electricity consist of in Texas?

Essentially, the three main charges which determine the cost of electricity per kWh are: delivery, supply, and taxes with state surcharges.

Delivery Charges

Delivery is the process of physically transporting electricity to the customer. The electricity will go from the point of production (power plant, hydroelectric plant, wind/solar farm, etc.), through the high voltage transmission network, then through the low voltage distribution network, and finally into your home.

The local utility company will cover this part of your service (and charge customers the standard energy rate and monthly fee) no matter which retail electric provider you choose to purchase electricity from. Although delivery charges do not vary with market variations, your delivery charges may evolve over time.

Supply Charges

Supply charges vary based on which electricity provider you choose (when moving into a new home or switching to a different REP). These prices include the real market cost of electricity (the wholesale cost of electricity), as well as the overhead costs associated with doing business, such as customer service.

Energy taxes on bill

Your electricity tax rates vary based on where you live, and can include:

1. Local Sales & Use taxes: can range anywhere from 6.25% to 8.25% in Texas.
2. Utility incurred taxes: charged by the state to the utility company. The utility company will then charge the customer in order to have that expense reimbursed.
3. Energy taxes: directly charged by your local government to fund new policies, new incentive programs (such as renewable energy funding), assistance programs (such as programs for people affected by natural disasters) and so on. These charges are included in the cost of electricity per kWh, and are the same regardless of the electricity provider you choose.

Compare plans with competitive electricity rates that are offered by electric providers in Texas

Texas has over 70 different retail electric providers competing for customers, and each REP has from 1 to 9 (or more) plans to choose from. The electricity plans vary in several aspects but two of the most used criteria are: rate type, time-based plans, and renewable energy options.

Fixed versus variable electricity rate plans

Fixed-rate plans have the advantage of "locking in" the cost of electricity per kWh for the duration of the contract (6, 12, 24 months or more).

Under variable-rate plans, the price of electricity per kilowatt-hour may change from month to month. Prices may fluctuate due to changes in weather, demand, and other factors. The benefit of variable rate plans is that consumers can take advantage of price decreases.

There are many cases of customers seeing the price of the kWh increasing to excessive amounts. Most complaints towards retail electric providers are due to abusive variable rates. Nevertheless, reputable providers can usually be trusted, even with variable rates.

Time of Use electricity rate plans

Time of Use plans are a type of variable rate plan, where the price of electricity will be fixed at one price during the day, and fixed at another price during the night.

With these types of plans, your provider will normally have a schedule including peak rates, when demand and prices are higher (during the day), and off-peak rates, when lower use delivers significantly lower prices (during the night).

 This can be advantageous to consumers who are able to shift their electricity usage to off-peak times.

Green energy offers

Some REPs offer plans with the option to choose renewable energy to power your home. The rate difference with adding this feature is generally higher than the standard non-renewable energy offering. This is different to renewable charges which your utility company may bill you in the delivery section of your bill. Renewable charges (in your delivery charges) are compulsory to all customers, whereas green energy offers are not.