Texas electricity deregulation means that most people and businesses in the state can choose their electricity provider. The utility company owns and maintains power lines and infrastructure, but you can pick from competing electricity providers for the best contract terms, service and prices.
Millions of customers throughout the state of Texas enjoy competitive choice, for their electricity, meaning if you’re in places like Houston or Dallas-Fort Worth, you can shop around. However, several large cities, such as areas of Austin and San Antonio, have no choice over who supplies their electricity.
What is Texas Electricity Deregulation?
Texas energy deregulation changed the way most people and businesses in the state buy their power. Instead of having to buy from the local utility company, deregulation allows customers to choose from suppliers, called retail electric providers (REPs).
Retail Electric Providers compete for your business by offering more choices. You can pick a fixed- or variable-rate plan, choose 100% renewable energy and explore contract options that could possibly lower your bill. This flexibility may make it easier to find a plan that fits your needs.
It’s important to understand the differences between REPs and utilities. REPs are responsible for buying electricity from the wholesale power market, creating plans and selling them to customers, and handling billing and retail customer services. Transmission and Distribution Utilities (TDUs), or utility companies, maintain the wires, poles, substations and power meters that physically move electricity into your home or business. You will see a TDU charge on your bill that covers these costs.
Does deregulation mean no regulation?
No. Retail Electric Providers (REPs) are subject to certification, licensing, registration, and reporting requirements with the Public Utilities Commission of Texas (PUCT). In addition, Retail Electric Providers are subject to the PUCT’s Customer Protection Rules. REPs are subject to state law, such as the Public Utility Regulatory Act (PURA), which gives the PUCT its authority. REPs must also follow ERCOT’s rules for grid management, as ERCOT is responsible for maintaining the physical grid and ensuring a consistent and reliable electricity supply.
The restructured market in Texas gives you a choice of REPs and the benefits of competition. At the same time, reliable energy delivery is ensured through a regulated transmission and distribution infrastructure.
When Did Texas Deregulate Electricity?
Texas officially deregulated its electricity market in 2002. However, the deregulation process took many years:
- Start of electric power: When the state first started electrifying, the system infrastructure was chaotic, with small power companies serving customers in a limited area. None of them connected, and there weren’t standards or an organized grid. As monopolies formed, Congress passed the 1935 Public Utilities Holding Company Act to regulate the industry and develop standards and cooperation.
- Early reform discussions: Looking for ways to break monopoly control of utilities, as well as increase competition to lower costs, raise customer service levels and spark innovation, policymakers and legislators formed the Public Utility Commission of Texas (PUCT) in 1975. Then, the Energy Policy Act of 1992 changed federal energy market regulation.
- Deregulation begins: In 1995, Texas passed Senate Bill 373, which required utilities to allow independent power generation companies to use their transmission and distribution infrastructure. The Electric Reliability Council of Texas (ERCOT) was created to manage the flow of power through the Texas infrastructure.
- Energy restructuring: With the 1999 passage of Senate Bill 7, REPs were introduced into the market and began competing for customers by providing better plans, a variety of contract options and competitive pricing.
- Renewable energy mandates: Texas policymakers included a Renewable Portfolio Standard (RPS) in 1999, mandating that a minimum of 2,000 MW of energy be generated from renewable sources by 2009. In 2005, the Texas legislature increased that goal to 10,000 MW.
- Retail market opens: In January 2002, the competitive market opened across deregulated areas of Texas. Investor-owned utility areas in Houston, Dallas-Fort Worth, Corpus Christi, Abilene and McAllen were among the first to open their markets. Co-ops in small towns around the state and parts of west Texas joined them.
- Lubbock opens: After nearly 10 years of planning, the Lubbock Power and Light utility company allowed customers to choose their electricity provider starting in 2024. Some municipal utilities, namely Austin Energy and CPS Energy in San Antonio, are still monopolies.
How Is Texas’s Deregulated Market Different from Other States?
Texas has taken a unique path to electricity deregulation. The way the state structures and runs electricity has its advantages, but also makes some trade-offs. Here are the main ways Texas energy deregulation is different:
- Independent grid: The Texas grid is almost entirely contained within the state. Most other state grids are part of regional interconnections that are regulated by the Federal Energy Regulatory Commission (FERC). In Texas, ERCOT runs most of the grid, with just a few DC ties to other interconnects, meaning it’s almost completely exempt from FERC oversight.
- Energy-only wholesale market: Companies generating electricity are only compensated for the power they produce. In other states, generating companies are compensated for their capacity or potential to produce energy. In Texas, energy prices can experience significant spikes during periods of high demand, which is a risk for consumers but also a key feature of the market. Market demand, as reflected by energy price spikes, is the signal to build more capacity, not a regulatory mandate.
- Services to balance the grid: Because the wholesale market is energy-only, ERCOT pays for ancillary service products to maintain a stable and reliable electricity grid by balancing supply and demand, controlling frequency, and support recovery from outages. These ancillary services include Regulation, Responsive Reserve, Non-Spin, and ERCOT Contingency Reserve Service (ECRS). They are provided by generators or loads/consumers who can adjust their output or consumption within seconds to minutes at ERCOT’s instruction.
- Greater price volatility: Since prices are set purely by the real-time interaction of supply and demand, the cost of power can fluctuate significantly when supply is limited. The trade-off is that the market doesn’t currently carry a capacity market cost. Consumers can help protect themselves from this volatility with a fixed-rate retail energy plan.
- Rapid growth of renewables: The incentives for investing in renewable power sources have encouraged innovation in power-generating companies. Wind, solar and battery storage technologies are being deployed more quickly in Texas than elsewhere. As of July, 2025, ERCOT has 32,729 MW, 39,968 MW and 14,137 MW of installed solar, wind and batteries, respectively.
- Largest deregulated market: 75% of the load in ERCOT is competitively served. ERCOT is also the most comprehensively deregulated market without a government-backed utility. The result is diverse energy choices for customers.
Benefits of Energy Deregulation in Texas
Customers in deregulated areas of Texas enjoy the benefits of a market where companies compete to earn their business. These benefits include:
- Customer choice: Choose the plan and terms that fit your needs. Over 140 companies now compete to service customers in Texas.
- Competitive prices: Competition can create better pricing options.
- Innovation: Companies compete on new technologies, renewable energy and plan options like time-of-use pricing.
- Growth of renewables: With the help of mandates and incentives, energy generation companies have quickly expanded wind, solar and hydro power. For example, in the last two years, 9,700 MW of solar capacity have been added to the system in Texas. The increased investment in renewables also gives customers the option of choosing a fully renewable energy plan.
- Economic development: With a dynamic and transparent electricity market, Texas attracts investors and entrepreneurs, creating jobs and prosperity.
What Are the Steps for Getting Power in Texas's Deregulated Energy Markets?
Below are the steps for setting up service in areas of Texas that offer deregulated electricity. You can also check out our Texas Electricity Guide for more details on how electricity service works in Texas and how to best evaluate your options.
- Shop for a REP. Find out which companies serve your area, research the plans and prices they offer and read reviews of their customer service.
- Sign up for a plan. Decide which plan works best for you. Many customers choose a fixed-rate plan to protect themselves from unexpected price spikes. You can also explore renewable plans or time-of-use plans.
- Get your electricity delivered. Your local utility will continue to deliver electricity to your home or business using its wires and infrastructure. If you change providers, you won’t experience any disruptions to your service during the switch.
- Contact your provider if you have any billing or customer service questions. If there’s a power outage, contact your utility company.
Why Choose Constellation for Texas Electricity?
From our variety of plans to our award-winning service, we go above and beyond to be your electricity provider of choice. Here are some of the benefits of choosing Constellation as your Texas electricity company:
- Fixed-rate plans: Lock in the same supply rate for the length of your contract to ensure a predictable monthly bill and protect yourself from seasonal price swings.
- EV plans: We offer plans in select cities for charging your electric vehicle at reduced rates.
- EV charger installation and Home Services: In select cities, you can enjoy the savings and convenience of charging your car at home with a professionally installed EV charger. We also offer Home Services to keep your HVAC, water heater and other appliances in top working condition.
- Weekly usage emails with estimated billing: We help you manage your energy usage and improve energy efficiency by providing regular usage updates with predicted billing.
- Constellation Rewards: Earn rewards like discounts, gift cards and more as our way of thanking you for being a customer.
- Refer a Friend program: Recommend Constellation to a friend, and when they sign up for a 12+ month plan, you both earn a $50 gift card.
- Community Champions grants: This program supports local projects and nonprofits in communities throughout Texas. As a Constellation customer, you can nominate organizations right in your area.
- Cancellation fee coverage: Some companies charge an early termination fee (ETF) when you switch. To make the transition easier, Constellation helps cover these fees up to $150 for you.
- Same-day electricity service: Constellation offers same-day electricity service so you can get connected quickly and without hassle.
Texas Energy Deregulation FAQs
How does electricity deregulation impact the Texas energy market?
After Texas electricity deregulation, customers have seen retail prices closely reflect wholesale costs in an economically efficient market.
What are the expected impacts of energy deregulation on the Texas electric grid in 2025 and beyond?
The deregulated power market in Texas continues to evolve due to the ever-changing landscape of supply and demand. The demand in Texas is rising because of unprecedented electricity demand growth, driven by data centers, cryptocurrency mining, and population increases. While new capacity, primarily from solar and batteries, is being added, it may not keep pace with demand. There are concerns of potential electricity shortfalls in the near future if the grid does not develop additional generation. In its Capacity, Demand and Reserves (CDR) report published in May 2025, ERCOT stated that the planning reserve margins for the summer peak Load and peak Net Load show potential shortfalls beginning summer 2028.
Although Intermittent renewables have decreased overall electricity costs, they have also caused the grid to be overall less reliable due to its unpredictable generation
The dominance of renewable energy in new capacity has brought many challenges. Renewable energy sources like solar and wind complicate the current system for maintaining grid stability due to their intermittent and variable nature, which is different from the consistent, centralized power from firm dispatchable generation. The traditional grid wasn't designed for the fluctuating output of renewables, leading to potential issues like frequency and voltage instability. However, new technologies and strategies, including energy storage, smart inverter-based resources, and synchronous compensators, are being developed to provide the necessary stability and manage these challenges.
On the consumer side, changes in the power market design have allowed for more innovative energy products. Time-of-use plans, which charge lower rates during off-peak hours, are emerging to leverage new grid supply curves. Some large consumers, like data centers, are also exploring private power solutions and flexible operating schedules to manage costs.