Texas Commercial Electricity FAQ
25 questions answered about rates, contracts, switching providers, TDU charges, and the ERCOT market
Pricing & Rates
Q:How much does commercial electricity cost in Texas?
Texas commercial electricity costs typically range from 8-14 cents per kWh in 2026, with small businesses paying 10-14¢, medium businesses 9-12¢, and large businesses 8-10¢ per kWh. Total costs including TDU delivery charges (3-5¢ per kWh), base fees, and demand charges typically range from 13-17¢ per kWh all-in. Actual rates depend on usage volume, contract terms, location, and market conditions.
Q:What is a TDU charge and why is it on my bill?
TDU (Transmission and Distribution Utility) charges are fees for delivering electricity through power lines to your business. Your TDU provider (Oncor, CenterPoint, AEP Texas, Entergy, or TNMP) maintains the physical infrastructure. These charges are regulated by the Texas Public Utility Commission, non-negotiable, and typically add 3-5¢ per kWh to your bill regardless of which retail electricity provider you choose.
Q:Can I negotiate my commercial electricity rate in Texas?
Yes, Texas businesses can negotiate commercial electricity rates because the market is deregulated. You can contact providers directly or work with a professional who negotiates on your behalf. Professionals typically secure rates 15-30% lower than direct provider pricing by comparing quotes from extensive network of suppliers and using volume purchasing power. Businesses with higher usage (50,000+ kWh/month) have the most negotiating leverage.
Q:What is a demand charge on my commercial electricity bill?
Demand charges are fees based on your peak electricity usage (measured in kW) during any 15-minute interval in a billing period. If your business hits 100 kW peak demand and your contract has an $8/kW demand charge, you pay $800 that month regardless of total kWh consumed. Demand charges typically add $5-15 per kW and significantly impact businesses with high peak usage like restaurants, manufacturing, or data centers.
Q:What is a base service fee on my commercial electricity bill?
A base service fee is a fixed monthly charge (typically $15-50 for commercial accounts) that covers meter reading, billing, customer service, and account maintenance. This fee applies regardless of how much electricity you use. Base fees are higher for accounts with demand meters, multiple meters, or three-phase service. The fee is disclosed in your Electricity Facts Label (EFL) and cannot be negotiated separately from your overall rate.
Contracts & Terms
Q:What's the difference between fixed and variable electricity rates?
Fixed-rate contracts lock in your per-kWh rate for 12-36 months, providing budget certainty and protection from price spikes. Variable-rate contracts fluctuate monthly based on wholesale market prices—rates can drop during mild weather but spike during heat waves or cold snaps. Most Texas businesses choose fixed rates to avoid extreme cost volatility, especially during summer and winter peak demand periods.
Q:How long should my commercial electricity contract be?
Most Texas businesses choose 12-24 month contracts to balance rate stability with market flexibility. 12-month contracts allow annual rate shopping to capture market improvements. 24-36 month contracts lock in lower rates when market conditions are favorable but reduce flexibility if rates drop. Month-to-month contracts offer flexibility but typically cost 15-25% more than fixed-term agreements.
Q:Should I choose a 12-month or 24-month electricity contract?
Choose a 12-month contract when market rates are high or declining, allowing you to re-shop sooner for better rates. Choose a 24-month contract when market rates are low or rising, locking in favorable pricing longer. 12-month contracts offer more flexibility and are ideal for businesses with uncertain growth or location plans. 24-month contracts typically offer 0.5-1.5¢ per kWh lower rates than 12-month contracts when market conditions are stable.
Q:What happens if I break my commercial electricity contract early?
Breaking a commercial electricity contract early triggers early termination fees (ETFs) specified in your contract. ETFs typically range from $0.05-0.15 per kWh for remaining contract months, which can total $500-5,000+ depending on usage and time remaining. Some contracts allow penalty-free termination if you move locations, close your business, or if rates drop significantly. Always review ETF terms before signing and negotiate lower ETFs when possible.
Q:What is an Electricity Facts Label (EFL)?
An Electricity Facts Label (EFL) is a standardized document required by Texas law that discloses all charges, fees, and terms for an electricity contract. The EFL shows the per-kWh rate at different usage levels (500, 1000, 2000 kWh for residential; custom levels for commercial), TDU delivery charges, base fees, demand charges, early termination fees, contract length, and renewable energy percentage. Always review the EFL before signing to understand total costs.
Q:What should I do when my commercial electricity contract is about to expire?
Start shopping 60-90 days before your contract expires to avoid automatic renewal at higher rates. Request 12 months of interval usage data from your TDU provider, compare quotes from multiple providers or contact a professional, review your current contract for early termination fees, negotiate better terms using your payment history as leverage, and sign a new contract 30-45 days before expiration. Avoid waiting until the last minute—rushed decisions often result in 15-25% higher rates.
Understanding Your Bill
Q:How do I read my commercial electricity bill?
Texas commercial electricity bills have four main sections: (1) Energy charges (per-kWh rate × usage), (2) TDU delivery charges (regulated fees for power line delivery), (3) Demand charges (if applicable, based on peak kW usage), and (4) Base service fees (fixed monthly charge for meter reading and billing). Your Electricity Facts Label (EFL) explains all charges in detail. Total cost divided by total kWh gives your effective all-in rate.
Q:What is load factor and why does it matter?
Load factor is the ratio of your average electricity usage to your peak usage, expressed as a percentage. A high load factor (60-80%) means consistent usage with minimal spikes, resulting in lower per-kWh costs and smaller demand charges. A low load factor (20-40%) indicates high peak usage relative to average consumption, leading to higher demand charges and overall costs. Businesses can improve load factor by shifting high-energy tasks to off-peak hours.
Q:What is interval data and should I use it?
Interval data is detailed electricity usage recorded in 15-minute increments, showing exactly when and how much power your business consumes. This data helps identify peak demand periods, usage patterns, equipment inefficiencies, and opportunities to reduce costs. Most commercial accounts with demand meters have interval data available through your TDU provider's online portal (Smart Meter Texas for most areas). Analyzing interval data can reduce costs by 10-20% through demand management.
Q:What is a power factor charge and do I have to pay it?
A power factor charge penalizes businesses whose electrical equipment creates inefficient power usage (power factor below 0.90-0.95). Power factor measures how effectively your business converts electricity into useful work. Low power factor (caused by motors, transformers, and inductive equipment) wastes energy and strains the grid. Charges typically add $0.50-2.00 per kW of demand when power factor falls below thresholds. Installing power factor correction equipment eliminates these charges.
Texas Market & ERCOT
Q:What is ERCOT?
ERCOT (Electric Reliability Council of Texas) is the independent system operator that manages the Texas power grid, serving 90% of the state and 26 million customers. ERCOT balances electricity supply and demand in real-time, operates the wholesale electricity market, and coordinates grid operations across Texas. ERCOT is unique because it operates independently from other U.S. grids, avoiding federal regulation while enabling Texas's deregulated retail electricity market.
Q:How does ERCOT pricing affect my bill?
ERCOT sets wholesale electricity prices that retail providers pay to purchase power. When ERCOT wholesale prices increase during extreme weather or high demand, retail providers' costs rise. Businesses on fixed-rate contracts are protected from these fluctuations, while variable-rate contracts directly reflect ERCOT price changes. ERCOT prices can range from negative during high renewable production to $5,000 per MWh during grid emergencies, making contract structure crucial for cost management.
Q:What's the difference between a retail electricity provider (REP) and a TDU?
A retail electricity provider (REP) is the company you choose that supplies electricity and sends your monthly bill—examples include TXU Energy, Reliant, and Direct Energy. A TDU (Transmission and Distribution Utility) owns and maintains the physical power lines and delivers electricity to your location—examples include Oncor, CenterPoint, and AEP Texas. You choose your REP but cannot choose your TDU, which is determined by your location.
Q:How do I know if I'm in a deregulated area of Texas?
You're in a deregulated Texas area if your location is served by Oncor, CenterPoint, AEP Texas, Entergy Texas, or TNMP as your TDU provider. Deregulated areas cover 75% of Texas including Dallas, Houston, Austin, Fort Worth, San Antonio (partial), Plano, Irving, Garland, The Woodlands, Sugar Land, Round Rock, Georgetown, Corpus Christi, and Laredo. Cities with municipal utilities (San Antonio CPS Energy, Austin Energy, Lubbock Power & Light) are not deregulated.
Q:Can I get renewable energy for my Texas business?
Yes, Texas businesses can purchase 100% renewable energy plans from most retail electricity providers. Renewable plans source electricity from Texas wind and solar farms, often at competitive rates (sometimes equal to or lower than fossil fuel plans due to abundant wind resources). Renewable Energy Credits (RECs) verify your renewable usage. Some businesses choose partial renewable plans (25-50% renewable) to balance sustainability goals with cost considerations.
Switching & Brokers
Q:How long does it take to switch commercial electricity providers in Texas?
Switching commercial electricity providers in Texas takes 7-14 days from contract signing to service activation. The process includes: submitting your application (1 day), provider processing and credit check (2-3 days), TDU coordination (3-5 days), and meter switch date (next available meter read date). There is no service interruption, no installation required, and no changes to your physical infrastructure. Your TDU provider remains the same.
Q:How do Texas businesses lower electricity costs?
Texas businesses lower electricity costs through five strategies: shopping competitive rates from extensive network of retail providers, negotiating custom contracts based on usage patterns, managing 4CP demand charges by reducing peak usage during summer afternoons, implementing energy efficiency measures, and working with experienced professionals who understand ERCOT market dynamics. Businesses typically save 15-30% by combining these approaches versus accepting default service or standard published rates.
Q:When should a business switch electricity providers?
Businesses should switch electricity providers at contract expiration to avoid early termination fees, when rates become uncompetitive compared to market offers (15%+ higher), if service quality declines with billing errors or poor support, when business changes like expansion or relocation occur, or when market conditions create exceptional savings opportunities. Evaluate switching 90-120 days before contract expiration to secure optimal timing and rates.
Special Situations
Q:Can I get commercial electricity with bad credit in Texas?
Yes, Texas businesses with bad credit can get commercial electricity, but options are limited and more expensive. You may need to pay a security deposit (typically 2-3 months of estimated usage), accept higher rates (2-4¢ per kWh above standard pricing), or choose prepaid electricity plans. Some providers specialize in no-credit-check commercial accounts. Working with a professional helps identify providers willing to work with credit-challenged businesses.
Q:Can I have multiple locations on one commercial electricity contract?
Yes, Texas businesses with multiple locations can aggregate all accounts under one master contract, often securing better rates through increased volume. Multi-site contracts simplify billing (one invoice for all locations), provide consistent pricing across sites, and increase negotiating leverage with providers. However, all locations must be in the same TDU service territory for aggregation. Brokers specialize in multi-site contract negotiation and management.
Q:How do I reduce my commercial electricity costs in Texas?
Reduce commercial electricity costs by: (1) comparing rates from multiple providers or using a professional (saves 15-30%), (2) choosing the right contract length based on market conditions, (3) reducing peak demand to lower demand charges, (4) improving load factor by shifting usage to off-peak hours, (5) negotiating lower early termination fees and base charges, (6) implementing energy efficiency measures (LED lighting, HVAC optimization), and (7) monitoring usage with interval data to identify waste.
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