How Houston Electricity Works: A Guide to Picking a Provider

Texas has a deregulated electricity market, which means you choose your provider — and that choice is more confusing than it needs to be. This guide explains how it actually works, where to compare plans, and how to avoid the traps that cost most newcomers a few hundred dollars before they figure it out.

1. How Texas electricity actually works

Texas has a deregulated electricity market. Most other states have a single regulated utility that handles everything — generation, delivery, and billing. Texas split these roles apart in 2002, which is why Houston's electricity setup looks confusing if you're coming from anywhere else.

Here's the structure:

• Power generators produce the electricity at coal, gas, nuclear, wind, and solar plants. You don't deal with them directly.
• ERCOT (Electric Reliability Council of Texas) operates the grid and the wholesale market. You don't deal with them directly either, but you'll hear their name during summer heat waves and winter storms.
• CenterPoint Energy is your TDU — the Transmission and Distribution Utility. They own the poles, wires, and meter at your house. They physically deliver electricity to you. You don't choose them; they're a monopoly determined by where you live. In Houston, it's CenterPoint. You call them when the power goes out.
• Retail Electric Providers (REPs) are who you actually choose and pay. Reliant, TXU, Direct Energy, Gexa, Champion, Frontier, Constellation, and dozens more. They buy electricity wholesale, package it into plans with various rates and terms, and bill you monthly.

So your monthly bill includes two components: what your REP charges for the energy itself, and what CenterPoint charges to deliver it. The REP collects both and pays CenterPoint on your behalf — you only get one bill.

This matters because CenterPoint's delivery charges are the same no matter which REP you pick. Roughly 4-5¢ per kWh plus a fixed monthly charge of around $4-5. You pay this regardless. So when you compare REPs, what you're really comparing is the energy portion — the part the REP controls — plus any monthly fees they layer on.

2. Where to compare plans (and where not to)

Use Power to Choose. powertochoose.org is the official comparison site run by the Public Utility Commission of Texas (PUCT). It's not perfect, but it's the only site where you're not being routed toward whichever provider pays the highest affiliate commission. Enter your ZIP code and you'll see every certified REP offering plans in your area.

Be skeptical of every other comparison site. ChooseEnergy, ElectricityRates, ComparePower, EnergyOgre, and similar are aggregators or brokers. Some are useful for filtering, but most prioritize providers based on commissions, not value. Use them to research, but verify on Power to Choose before signing up.

Don't sign up via door-to-door salespeople. Houston has a recurring problem with sales reps showing up at the door (sometimes wearing reflective vests that imply utility affiliation) trying to switch your service. The plans they sell are almost always worse than what's available on Power to Choose. Texas law gives you 3 days to cancel any contract signed at the door, but the cleanest move is to never sign at the door in the first place.

3. How to read a plan without getting tricked

Texas REPs are aggressive about marketing rates that look great until you read the fine print. The headline number on Power to Choose is usually misleading. Here's what to actually pay attention to:

Read the EFL — every time

The Electricity Facts Label (EFL) is the standardized one-page document every REP must publish for every plan. It shows the all-in price at three usage levels (500, 1,000, and 2,000 kWh per month), the contract length, the early termination fee, and any monthly base fees.

Compare plans based on the EFL price at the usage level you actually expect — not the headline rate displayed on Power to Choose's main listing. The headline rate is often what you'd pay only if you use exactly 1,000 kWh, which doesn't match most Houston households.

Your expected usage depends heavily on home size, season, and lifestyle. A 1,500 sq ft apartment with one or two adults might run 800-1,200 kWh per month year-round. A 3,000 sq ft suburban home with a family of four can clear 2,000-3,000+ kWh in July and August, then drop to 1,000-1,400 kWh in spring and fall. Houston summers swing usage dramatically because of cooling load.

If you already have a year of usage data (from a previous Texas address or a similar-sized home you've lived in), use that. Look at your highest-usage month and your average — and compare plans at both. A plan that looks cheap at 1,000 kWh might be punishing at 2,500.

If you don't know your usage yet — new to Texas, new home, no historical data — compare plans at 1,000 kWh as a baseline. Then once you have a few months of bills, re-shop with your real numbers in mind. The EFL shows pricing at 500, 1,000, and 2,000 kWh, so you can sanity-check how a plan behaves across the range.

Avoid usage-credit and tiered plans on your first contract

These are the trap plans. They look amazing at the average usage threshold but punish you above or below it.

• "Bill credit" or "usage credit" plans give you a $50-$100 credit if your monthly usage hits a specific range — often 1,000-2,000 kWh. If you use 999 kWh, no credit. If you use 2,001 kWh, no credit. The advertised rate becomes meaningless if you don't hit the band exactly. New residents have no idea what their usage will be, so these plans are essentially gambling.
• Tiered or stepped rate plans charge different rates per kWh depending on how much you use. The first 500 kWh might be 8¢, the next 500 kWh might be 12¢, and anything above 1,500 kWh might be 16¢. Hard to predict, easy to get burned in summer.
• Variable-rate plans change month-to-month with the wholesale market. The rate you sign up for can — and will — change. During the February 2021 winter storm, some variable-rate customers got bills over $5,000 for a single month. Avoid these unless you understand exactly what you're getting into.

Always pick a fixed-rate plan. The rate is locked for the entire contract term. Predictable, boring, no surprises. This is what you want.

Reading the EFL — what the numbers actually mean

Every EFL has a price box at the top showing the all-in average price per kWh at three usage levels: 500, 1,000, and 2,000 kWh. These numbers already include everything — the REP's energy charge, any base fees, the CenterPoint delivery charge, and the CenterPoint monthly charge. You don't have to do the math.

Example: a recent EFL for a 36-month fixed plan shows:

• At 500 kWh: 14.3¢ per kWh all-in
• At 1,000 kWh: 13.8¢ per kWh all-in
• At 2,000 kWh: 13.6¢ per kWh all-in

Same plan, three different effective rates depending on how much you use. The rate drops as usage rises because the fixed monthly fees (REP base fee, CenterPoint $4.39) spread across more kWh.

Practical implication: a plan that looks great at 1,000 kWh might not be the best at 2,500 kWh, and vice versa. Always check all three numbers on the EFL before signing. If your expected usage is between the levels shown (say, 1,500 kWh), you can interpolate roughly — or use the underlying components listed below the price box to calculate exactly.

Watch for plans where the rate rises between the levels. If a plan shows 13¢ at 500 kWh, 11¢ at 1,000 kWh, and then 14¢ at 2,000 kWh, that's a usage-credit or tiered plan in disguise — the credit only applies in a specific band. Avoid these.

The EFL lies for usage-credit plans — here's why

The 1,000 kWh and 2,000 kWh prices on the EFL assume you hit those thresholds exactly. For most plans this is fine because the rate is roughly the same anyway. For usage-credit plans, the math breaks at the edges — and that's the entire point of these plans.

Example: a plan offering a $100 bill credit if you use 1,000-2,000 kWh advertises around 9¢/kWh on the EFL at 1,000 kWh. Use 999 kWh — no credit, your effective rate jumps to 19¢/kWh. Use 2,001 kWh — no credit, same problem.

If you're on a credit plan and want to know what you'll actually pay, you have to do the math manually using the underlying components on the EFL — base charge, energy charge, delivery charge, and the credit's exact eligibility rules. The whole point is that the displayed rate is theoretical for most real-world usage.

Easier solution: don't pick credit plans. Pick a flat fixed-rate plan where the EFL prices reflect what you'll actually pay across your real usage range.

4. Contract length: lock in long when you find a good rate

Plans typically come in 6-month, 12-month, 24-month, and 36-month terms. Conventional advice says go short for flexibility. The honest experience-based answer is the opposite:

If you find a good fixed rate, lock in 24 or 36 months. Texas electricity rates have trended upward over the long term, and short contracts mean you'll be re-shopping at potentially higher rates. The peace of mind from locking a known cost for 2-3 years is worth more than the theoretical flexibility of a 12-month plan.

Rates peak in the summer. Wholesale electricity prices spike during Texas summer months (roughly June through September) because cooling demand strains the grid. New plan rates published during summer are usually higher than rates published in spring or fall. If your contract is ending in summer, the new rates you'll see are at their worst. Lock in during the cooler shoulder months (March–April or October–November) when possible.

Every fixed-rate contract has an early termination fee (ETF), usually $150-$250 if you cancel before the contract ends. That sounds scary, but there's a key exemption: Texas REPs are required to waive the early termination fee if you're moving out of their service area or out of state. You typically need to provide proof — a forwarding address, a lease, a closing document, or a final utility bill at the new address.

Practical implication: don't let fear of the ETF push you into a shorter contract. If you might move within 2-3 years (job change, family situation, relocating to a different metro), the ETF won't apply. Lock in the longer contract.

If you're moving within the same REP's service area (e.g., from Sugar Land to Katy, both in CenterPoint territory), the REP will typically transfer your existing plan to the new address rather than terminate it. No ETF, no shopping required — though you can switch providers if you want to.

5. Other things to watch for

Auto-renewal at variable rates

When your contract ends, REPs are required to send notice. If you don't act, most plans auto-roll into a month-to-month variable-rate plan that's almost always significantly more expensive than what you were paying. Set a calendar reminder 30-45 days before your contract ends and shop again. This is when REPs make their margin — on customers who don't pay attention.

Prepaid plans

Some plans ("no deposit" or "prepaid") let you avoid a deposit by prepaying for electricity. The rates are typically worse than standard plans. Useful only if you have credit issues that prevent you from getting a normal plan. If your credit is fine, skip these.

"Free nights" or "free weekends" plans

These plans give you free or very cheap electricity during specific hours, but charge significantly more during peak hours. They can be worth it if your usage really skews to those off-peak hours (electric vehicle charging overnight, for example). For most families with normal usage patterns, the higher peak rates wipe out the savings. Run the math against your expected usage before committing.

Renewable / green energy plans

Most REPs offer plans labeled 100% renewable. The marketing implication is that your electricity comes from wind or solar — but in practice, electrons in the grid are fungible. What you're paying for is the REP buying renewable energy credits (RECs) to offset your usage. There's nothing wrong with this if it matters to you, but rates are usually 0.5-1.5¢/kWh higher than equivalent non-green plans. The price premium funds renewable generation development indirectly.

6. The actual workflow when you're moving in

Once you've signed a lease or closed on a home, you have a few business days to set up power before your move-in date. Here's the sequence that works:

1. Confirm your address is in CenterPoint's service territory (it almost certainly is if you're in the Houston metro). Most online tools confirm this automatically when you enter your ZIP.
2. Go to powertochoose.org and enter your ZIP code. Filter for fixed-rate plans, 24-month or 36-month terms.
3. Sort by the price-per-kWh column. If you have past usage data, sort at your expected monthly usage; if not, sort at 1,000 kWh as a baseline. Note the top 5-10 plans.
4. Click into each one and read the EFL (Electricity Facts Label) PDF. Check the all-in price at 500, 1,000, and 2,000 kWh — these three numbers tell you how the plan behaves across your likely usage range. Confirm contract length and any monthly fees.
5. Check the REP's reputation. Power to Choose shows a complaint rate. The PUCT also publishes complaint scorecards. Avoid REPs with consistently bad reviews — even a slightly cheaper rate isn't worth a billing nightmare.
6. Sign up directly on the REP's website. Have your move-in date ready. They'll need your address and a deposit decision (which depends on credit check).
7. CenterPoint will physically activate service on your move-in date. You don't separately call CenterPoint — your REP coordinates this.

Total time: about 30-60 minutes if you actually read the EFLs. Most newcomers spend 5 minutes, pick the first plan they see, and pay the price for it for the next year. Don't be that person.

7. Common mistakes Houston newcomers make

• Picking the lowest headline rate. Headline rates are designed to look attractive at a single usage level (usually 1,000 kWh). Always compare on all-in price at your expected usage, and check how the plan behaves at 500, 1,000, and 2,000 kWh from the EFL.
• Signing a 6-month or 12-month contract "to keep options open." In Texas, the option you're keeping open is the right to re-shop at higher summer rates in 6 months. If you find a good fixed rate, lock it in long.
• Ignoring the EFL and trusting marketing copy. REPs can advertise almost anything on their main site. The EFL is the only document they're legally accountable for. Read it.
• Letting a contract auto-renew. Auto-renewal is a profit center for REPs. Set a 30-day reminder before your contract ends and shop again.
• Confusing ChooseEnergy.com with PowerToChoose.org. These are different sites. ChooseEnergy is a private aggregator with commission incentives. Power to Choose is the official PUCT site with no commission incentives.
• Letting summer dictate the contract decision. If your contract is up in July, you're shopping in the worst rate environment of the year. Plan ahead — sign long-term contracts during March-April or October-November when possible.
• Signing up at the door. Door-to-door electricity sales are almost always worse than what's on Power to Choose. If someone shows up at your door pitching electricity service, politely decline.

Bottom line

Texas electricity is confusing on purpose. The retail providers benefit when you don't read the fine print. Spend an hour on Power to Choose, read the EFLs, pick a fixed-rate plan with a long term, and lock it in during the cooler months when rates are lower. That hour will save you several hundred dollars over the next 2-3 years compared to the average newcomer who picks whatever plan their real estate agent mentioned in passing.

Once you've done it once, you'll know the playbook for next time.

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