Essential terms and definitions for understanding the Texas deregulated electricity market. Written for business owners and decision-makers navigating commercial energy contracts.
The Electric Reliability Council of Texas manages the electricity grid for approximately 90% of Texas. ERCOT coordinates electricity generation, transmission, and delivery across the state's deregulated energy market, ensuring grid reliability and facilitating competition among retail electricity providers.
A company licensed to sell electricity directly to Texas consumers in the deregulated market. REPs purchase wholesale electricity from generators and sell it to businesses and residents at retail rates. Texas has an extensive network of REPs competing for customers across the ERCOT service territory.
The company that owns and maintains the physical power lines, poles, and infrastructure delivering electricity to your business. TDUs charge fixed fees for infrastructure maintenance regardless of which REP you choose. Common Texas TDUs include Oncor, CenterPoint Energy, and AEP Texas.
The standard unit measuring electricity consumption. One kWh equals using 1,000 watts of power for one hour. Commercial electricity rates are priced per kWh. A typical small business might use 2,000-5,000 kWh monthly, while larger operations can consume 50,000+ kWh.
Fees based on the highest rate of electricity consumption during a billing period, measured in kilowatts. Demand charges penalize businesses for peak usage spikes, even if they occur briefly. Common in commercial contracts, these charges can significantly increase bills for businesses with inconsistent energy patterns.
An electricity contract where the per-kWh rate remains constant for the entire contract term, typically 12 to 36 months. Fixed rates protect businesses from wholesale market price fluctuations and provide predictable monthly electricity costs, making budgeting easier regardless of seasonal demand changes.
An electricity contract where the per-kWh rate fluctuates monthly based on wholesale market conditions. Variable rates can decrease during low-demand periods but increase significantly during high-demand seasons or grid emergencies. These contracts offer flexibility but create unpredictable monthly costs for businesses.
The period before your electricity contract expires when you can negotiate new rates without early termination fees. Most contracts auto-renew at higher rates if not renegotiated. Brokers monitor renewal windows to secure better rates before auto-renewal locks businesses into expensive month-to-month pricing.
The 2002 restructuring of Texas's electricity market that separated generation, transmission, and retail sales. Deregulation allows businesses to choose their electricity provider from competing REPs rather than being assigned a monopoly utility. This competition aims to lower rates and improve customer service through market forces.
A professional who helps businesses compare rates from multiple REPs and negotiate contract terms in the deregulated Texas market. Brokers analyze usage patterns, request quotes from providers, and manage the switching process. Businesses pay nothing—brokers receive compensation from electricity providers, not clients.
The Texas deregulated electricity market operates differently from traditional utility systems. Since 2002, businesses have been able to choose their electricity provider from an extensive network of competing Retail Electric Providers (REPs) across the ERCOT service territory.
Understanding these key terms helps business owners make informed decisions when comparing electricity quotes, negotiating contract terms, and managing energy costs. Commercial electricity brokers use this terminology when analyzing usage patterns and securing competitive rates for Texas businesses.