Texas Commercial Electricity Shopping Guide

How do I set up Small Business Electricity Service in Texas?

• The Company Legal Entitiy Name will be required
• The Company FEIN (Federal Employee Tax ID) Will be required
• The Energy Retailer will Run Credit on You or Your Business
  • DUNS (if available) Get a DUNS number - It's free and it allows your business to build credit
  • Federal Employee ID Number (FEIN)
  • Owners Social Security Number
• You will be required to sign an E-LOA (Electronic Letter of Authorization) allowing the retailer to pull the historical usage for the address you are moving into
  • This allows the retailer to view the usage paterns at the address
  • If you are a new business in a new space. Estimated usage based on your business type will be used.

Need to Get a Better Rate and Switch to a Cheaper Plan?

• The Company Legal Entitiy Name will be required
• The Company FEIN (Federal Employee Tax ID) Will be required
• The Energy Retailer will run credit on you (the owner) or your business they will need:
  • DUNS (if available)
  • Federal Employee ID Number (EIN)
  • Owners Social Security Number
• You will be required to sign an E-LOA (Electronic Letter of Authorization) allowing the retailer to pull the historical usage for the address you are moving into
  • This allows the retailer to view the usage paterns at the address

Understand What items in your Business use the most energy

• Typical High Energy Cost items in a Business
  • Traditional AC Systems
  • Electric Motors
  • Pumps
  • Compressors
  • Electric Heaters or Dryers
  • Electric Ovens

Understand Demand Charges

Demand Charges are charges that Utility Companies charge based on the maximum amount of power (KW) drawn for any given time interval (typically 15 minutes) during the billing period, multiplied by the relevant demand charge ($/kW). In Texas these charges are called "Pass Through Chrages." Texas Electricity Retailers do not control the pass through charges

Why Do Utilities Use Demand Charges?

Demand charges exist to incentivize customers to spread their energy usage over time. This is because Texas utilities must maintain enough capacity to meet the needs of all customers during the points in time when the most energy is drawn from the grid (such as a hot day when most customers are using air conditioning). This means that a large amount of expensive equipment, such as power plants, must be kept on standby for these rare peak demand periods. Through demand charges, customers that draw a lot of power over short periods of time contribute more to the costs of building and maintaining the necessary infrastructure needed for peak times.

An example of Demand Charge usage; Company 1 uses 3000 kWh evey day and has stable, flat usage and uses 60,000kWh per month. Company 2 runs a big pump every day between 2PM and 3PM and uses 5000kWh during that time, then goes down to 500kWh for the rest of the day and uses 60,000kWh per month.

In our example above Company 2 will have a higher bill because it uses its power during peak hours of the day. In Texas the local utility (Oncor, Centerpoint, AEP or TNMP) will add demand charges to the bill.

To calculate demand charges, the maximum power demand is multiplied by the demand charge rate of the prevailing utility rate. In some cases, rate structures include multiple types of demand charges, with higher charges during hours of peak demand and lower charges during “partial-peak” or “off-peak” hours. For customers whose utility rates include demand charges, these fees can contribute significantly to their monthly electricity bills.

Types of Texas Business Electricity Rates

There are 3 popular Commercial Electricity Rate Structures in Texas:

• Fixed-rate Plans: This plan type charges a fixed fee for each kilowatt hour (kWh) you use. You pay the same price throughout your entire contract. Contracts typically last between one and three years. If you cancel your contract before it ends, however, you might have to pay an ETF (early termination fee). Fixed-rate plans have the advantage that they lock your rate for the duration of your contract and protect you against fluctuations in the energy market. These plans give you predictability in your monthly bills.
• Variable rate plans: A variable-rate plan is a plan where the monthly rate you pay varies according to wholesale electricity prices. This type of plan does not require you to sign a contract. You can change your electricity plans at any time. Variable-rate plans may cause a spike in electric rates during high demand periods.
• Indexed Rates - rates tied to market condions or other market drivers - i.e. wholesale energy prices, natural gas rates, etc.

Fixed rate contracts are by far the most popular and the most stable in price. Variable Rates are options if you need short term power. Perhaps during a renovation, or initial strat of a business. While Indexed products are the most advanced types of Plans with the most risk, and most often employed by sophistcated buyers who use the Index Price and Time Of Use to maximize savings

Types of Business Electricity Contracts

• Short Term 1-11 months
• Long Term - 12+ Months L

Look for contract flexibility: Understand the terms of the contract, including the length of the contract, cancellation fees, and the possibility of renewing or renegotiating the contract.

Consider renewable energy options: Look into renewable energy options, such as solar or wind power, and compare the costs and benefits of these options with traditional energy sources.

Read Ratings and Reviews: Look into the reputation of each REP and their customer service and other programs, such as rewards. This is an important aspect to consider, especially if you will be relying on them for support and assistance.

Renewable Business Energy Options

Benefits to using renewable energy if you're a B-Corp (benefit corporation):


• Environmental sustainability: Using renewable energy sources such as solar and wind power can help reduce the carbon footprint of your business, which aligns with the B-Corp mission to minimize negative impact on the environment.
• Cost savings: Renewable energy can be a cost-effective option over time, as the cost of producing renewable energy continues to decrease.
• Government incentives: Many governments offer incentives for businesses that use renewable energy, such as tax credits or grants, which can help offset the cost of investing in renewable energy.

Not a B-Corp? - Renewable Energy May Be Beneficial To Your Brand


• Environmental sustainability: Renewable energy sources such as solar and wind power do not produce harmful emissions, unlike fossil fuels. This helps to reduce the environmental impact of energy production and aligns with the goal of being an environmentally conscious business.
• Cost savings: As the cost of renewable energy continues to decrease, it can be a cost-effective option for businesses over time.
• Branding and reputation: By using renewable energy, a business can demonstrate its commitment to environmental sustainability, which can positively impact its reputation and attract customers who value environmentally-friendly practices.
• Social responsibility: Many business customers and stakeholders are increasingly concerned about the environmental impact of companies, by using renewable energy a business can show it is socially responsible.
• Long-term benefits: Renewable energy is a sustainable source of energy that will not run out, unlike fossil fuels. This can provide long-term benefits for the business, such as energy security and independence.

How to Reduce Energy Costs for Texas Businesses

Energy Audits:

Energy Audits are assessments of a building or facility's energy usage, which can identify areas where energy is being wasted and recommend ways to improve efficiency. By identifying areas where energy is being wasted, businesses can take steps to reduce consumption and lower their energy bills.

Track and Identify:

Another important step in managing energy usage is to track and monitor energy consumption. By monitoring energy usage over time, businesses can identify patterns and trends, which can help them identify areas where they can make changes to reduce consumption. Many modern energy management systems now come with sophisticated software, which allows businesses to view their energy consumption in real-time, thus giving them the ability to make adjustments as needed.

Technology and Devices:

Another way to manage energy usage is through the implementation of energy-efficient technologies and practices. Upgrading to energy-efficient lighting, appliances, and HVAC systems can significantly reduce energy consumption and costs. Additionally, implementing simple practices like turning off lights and equipment when not in use, or using natural light as much as possible, can also make a big difference.

Renewable Incentives:

Finally, businesses can look into implementing renewable energy sources, such as solar or wind power. These sources can help reduce their dependence on traditional fossil fuels and reduce their environmental impact. Additionally, many government incentives and rebates are now available for businesses that switch to renewable energy, which can further reduce costs.

Texas Business Electricity FAQs

What is a Retail Electric Provider (REP)?

A Retail Electric Provider (REP) is a company that provides electricity to customers in Texas. REPs are responsible for purchasing electricity from generators and reselling it to customers.

How do I choose the right electricity plan for my business?

To choose the right electricity plan for your business, you should assess your energy usage, compare plans and pricing, look for contract flexibility, consider renewable energy options, review and compare customer service, and check for government incentives.

What are TDSP charges?

TDSP charges, or Transmission and Distribution Service Provider charges, are fees that are added to your electricity bill in Texas. These charges are used to cover the cost of maintaining and upgrading the transmission and distribution infrastructure that delivers electricity to your business.

What is the difference between a fixed rate and a variable rate plan?

A fixed rate plan is a plan that has a fixed rate for the entire contract period, while a variable rate plan is a plan that has a rate that can change based on market conditions.

How do I know if my business is located in ERCOT's service area?

The Electric Reliability Council of Texas (ERCOT) manages the electric grid and power market for most of Texas. To check if your business is located in ERCOT's service area, you can check this website, TexasElectricityRatings.com, by entering your zip. You'll be presented with offers available in your area.

Are there any government incentives for using renewable energy?

Yes, there are government incentives for using renewable energy in Texas, such as tax credits, grants and rebates, you can check the Public Utility Commission of Texas (PUCT) website for more information.

Is it easy to switch to a new REP if I am not satisfied with my current provider?

Yes, in Texas, businesses have the freedom to choose their REP, and it's relatively easy to switch to a new Provider.