Wholesale Energy Rates & Plans in Texas 2024

As wholesale electricity prices fluctuate, so does your electric bill, as electricity providers pass on the rising electricity prices to their customers who have variable-rate plans. In most cases, however, Texas residents can enjoy a reliable and stable electric supply and no surprises on their monthly electricity bill. To better understand wholesale prices and how they work, let’s have a look at Texas’s deregulated energy market and see how Texas electricity rates are formed. 

What is Wholesale Electricity?

Texas residents do not purchase their electricity at wholesale prices. The reason for this is that you purchase electricity from one of many electricity providers working in the state. These electricity providers can then purchase electricity on the wholesale market and at wholesale prices – at a much lower electric rate than you do. 

Wholesale electricity is always purchased in bulk. The same goes for natural gas. Your energy provider buys wholesale electricity directly from the source – in this case, one of many power plants supplying the power lines of the Lone Star State with electricity. This electricity can come from a variety of sources, including: 

• Coal power plants – They are being phased out as we speak since they pollute too much, 
• Natural gas power plants – They are using the cleanest of all fossil fuels, 
• Hydropower plants – They are using the immense power of rivers to generate vast amounts of electricity, 
• Solar farms – They are using the sun’s energy to supply electricity, 
• Wind farms – They are using the power of the wind to spin their turbines and generate electricity, 
• Biomass and biogas – They are using biomaterials, such as animal manure and municipal organic waste to generate biogas which is then burned in turbines similar to natural gas would be, 
• And many more electricity sources. 

As buying wholesale electricity means purchasing vast amounts of it, only electricity providers can do so. They typically pay up to  $40 per 1 MW of electricity generated and then sell that electricity to Texas residents at slightly higher rates and charge per kWh of energy used. This means that electricity providers pay up to $0.04 per kWh and you pay more. However, it would be impractical to purchase your own electricity from a power producer. The electricity rate would be lower, but the sheer headache and paperwork would make you dizzy. 

The average price of electricity that Texas residents pay is $0.1228 per kWh. The difference between what you pay and what your energy provider pays is used to pay for all other expenses that your energy provider has: these include paying the staff and the management, general operations, and any taxes and fees they may be paying to the state, etc. This money also gives you access to free energy audits (consult with your energy provider if they offer this service) and any freebies and smart home energy solutions. 

What is ERCOT?

So, the Texas power grid includes power generators, utility companies, and electricity providers. This is a complex system, which demands that all these elements work in sync to ensure a reliable and stable power supply. For this reason, the Electric Reliability Council of Texas (ERCOT) was formed. It oversees the work of electricity providers, power generators, and utility companies and ensures the wholesale electricity market is fair and square. 

The Current Wholesale Electricity Price in Texas

Wholesale electricity prices vary throughout the day and throughout the seasons. This means that purchasing wholesale electricity can be a speculative job. The electricity price varies depending on the demand that is put on the power lines and how much electricity can be pumped into the grid by electricity generators. In general, when electricity is scarce, the prices go up. When there is a surplus of electricity, the prices fall down. 

This all means that the wholesale electricity price fluctuates too much. The industrial sector, for example, draws a lot of power during the day, while it is mostly quiet during the night. On the other hand, residential electricity is used mostly during the morning and late afternoon, and evening, as Texas residents get up and ready for work, or get back home after work and start showering and making dinner. 

As wholesale electricity prices rise and fall, so do the monthly electricity bills of those who do not have fixed-rate plans. The February 2021 blackout in the Texas grid saw as much as $9,000 per MWh of power, while the usual price is around $20-$40. May 2022, on the other hand, saw a $5,000 price tag per MWh  in Harris County in Texas. Nearby areas experienced a negative average price of electricity as power lines congestion hit the area. 

Factors That Affect Electricity Prices

Of course, supply and demand are not the only factors that affect the average wholesale price of electricity. As wholesale electricity comes in vast amounts, many factors can affect its price and availability. Some of the factors that affect wholesale electricity prices in the electricity market include: 

1. Fuel Price, 
2. Power Plant Prices,
3. Transmission and Distribution Area System,
4. Area Regulations, and 
5. Weather Conditions. 

There is, of course, one more factor that affects electricity prices in your area. That is the competition that naturally comes with a deregulated energy market. Namely, as there are many power providers offering diverse electricity plan options, the competition between them will ensure low prices on all electricity plan types they offer: fixed-rate plans, arable-rate plans, and wholesale electricity plans. Although some parts of Texas remained regulated, the vast majority of Texas territory is deregulated, ensuring lower prices for its customers and with only a maximum set price that electricity plans can sell you electricity at. 

Fuel Price

Fuel prices are the first thing we think about when we hear that electricity rates are likely to go up. Fuels, such as coal, oil, natural gas, and biogas are burned in huge boilers to generate electricity. As the price of these fuels is not fixed, neither is the price of electricity that it produces. Global fluctuations, such as the one after the COVID-19 pandemic or the recent US embargo on Russian gas have a say in the price of fuels that are available globally and their pricing. 

Power Plant Prices

Power plant prices also affect how much every kilowatt-hour will cost on the electricity market. Texas electricity prices, in part, depend on the price of new power plants, as they all cost to be built, operated, and run. Their maintenance costs as well. On top of these come the backup power plants – those that are there in case any of the online plants experience an emergency and need to disconnect their electricity generation from the grid. 

Transmission and Distribution Area System

Transmission and distribution area system operation and management cost as well. The power lines that take energy from electricity generation facilities to your home need their maintenance and modernization. All these cost a lot of money but are a sure investment into the reliability of power supply and good prevention of power outage. The February 2021 Texas blackout occurred, in part, because the grid was not winterized. 

Area Regulations

Local area regulations also influence the price of every kilowatt-hour you consume and pay. Local regulations usually cap off the price of electricity at a certain threshold and are meant to protect end-customers, such as yourself, from overpaying. $16,000 monthly electricity bills are a thing of the past with good regulations. 

Weather Conditions

Local weather conditions also play a role in energy prices. As we’ve said before the electricity market is volatile in face of supply and demand. During particularly hot and cold weather, the power plants’ efficiency drops, and energy usage increases. This means that the price of electricity can be manifold from what it normally is on a calm spring day, for example. 

Furthermore, as reliance on fossil fuels is lowered and we rely more on renewable energy, it is important to note that their intermittency (usually due to the weather conditions), is something to be aware of. Namely, the sun does not always shine, and overcast skies usually mean lower solar production. Likewise, the wind does not always blow and rainfall is not always as bountiful as it should be. All these factors reduce the amount of electricity available in the grid and up the prices electricity companies charge to Texas residents. 

Power producers know that intermittency is the biggest issue with renewables, that is why they invest a lot of money into solar energy storage solutions and diversification of energy sources used. This approach ensures the best electricity rates on renewable Texas energy and that your electric bill stays within reasonable limits. Having a stable and reliable electricity rate is the foundation stone of any economy. 

Wholesale Energy Plans

Wholesale electricity plans are energy plans that tie in the Texas electricity rates to the wholesale electricity prices. With these energy plans, you get electricity rates that change throughout the day. Although they give you the most chances to save, every electricity provider will tell you that they are just too risky for most Texans. This is because of the possibility that the prices skyrocket, leaving you with a high energy bill that you have to pay. 

vs Fixed-Rate Plans

A wholesale electricity plan is not safe for most users. This is why we do not suggest you take this energy plan type. A much better alternative is fixed-rate plans. With fixed-rate plans, your electricity price is kept fixed for the contract term. This type of energy plan gives you the most security, as your energy price does not depend on the weather, fuel price changes, or any other factors. 

vs Variable Rate Plans

If you are considering variable-rate plans, you should know that these come with a risk, too. Unlike a wholesale energy plan where the electricity rates fluctuate throughout the day, your electricity provider will adjust your electricity rates in fixed-rate plans once a month. Although these plans are supposed to give you chances to save, you should know that your electricity provider can charge as little (or as much) as they want. 

With the average electricity rates around 10% lower than the national average and a free market where electricity can be sold and purchased, Texas leads the US with a great example of what a well-organized grid should look like. However, as monthly bill fluctuations have shown, weather events can change this situation quickly. For this reason, it is best to go with a fixed-rate plan and enjoy the benefits that a fixed-rate plan can give you. Some of the best electricity rates on Electricrate.com are fixed-rate plans. 

Texas Electric Companies

There are well over 100 Texas electricity providers. If you want to choose the best electricity plan for you and your family, you may be in a bit of a problem, as comparing all these energy plans and energy data can be a bit of a hassle. However, we’ve looked into some Texas electric companies, and we’ve come up with a list of the top 15 electric providers in the Lone Star State, according to customers: 

Texas Electricity Rate

The average Texas electricity rate is lower than the national average, at $0.1228 per kilowatt-hour. However, making your choice is not easy, especially as the Texas legislature allows many energy providers. Below, you will find a table with some of the most popular energy plans in Texas, as well as information on electric utilities and energy providers offering these electricity plan options, contract terms, and the electricity rate. 

FAQs

Conclusion

Whatever part of Texas you may live in, your electric utilities allow you to choose among the many energy plans offered in your area. As every new energy provider enters the Texas electricity market, the offer gets richer and more diverse. Here, we’ve explained how wholesale electricity prices are formed, what factors contribute to your electric bill, as well as what the most popular Texas electricity rates are. 

Updated on 09-12-23