Electricity Deposit Mid-Contract Texas: Your Rights

Picture this: you signed a 12-month fixed-rate plan in the spring, you are seven months in, and a letter from your Retail Electric Provider arrives saying you owe a security deposit or face disconnection. Your first reaction is probably that someone made a mistake. Your second reaction should be to check whether the REP is actually within its rights, because sometimes it is not.

Texas deregulated electricity means the Public Utility Commission of Texas (PUCT) writes the rules that every licensed REP must follow, including rules on exactly when a provider can ask an existing customer for a deposit, how large that deposit can be, and when they have to give it back. Those rules are not suggestions, and knowing them word for word is the best tool a customer has when they get a notice they did not expect.

PUCT substantive rules allow a REP to require a deposit from an existing customer, including one who is still inside a contract term, under a limited set of conditions. The two most common triggers are:

Late payments. If you have paid late two or more times within any 12-month period, the REP has grounds to require a deposit. One late payment alone typically is not enough. The 12-month window resets, so a late payment from two years ago does not count against you today.

Returned payments. A returned check or a failed ACH draft counts as a payment event that can affect your deposit status, sometimes even on a first occurrence depending on the dollar amount involved.

Material change in creditworthiness. If a REP enrolled you based on a credit check that showed you were low-risk, and something later causes your credit profile to shift significantly, the rules permit the REP to reassess. In practice this trigger is used less often than the late-payment trigger and is harder for a REP to document cleanly.

What a REP cannot do is demand a deposit simply because rates in the market have changed, because the provider wants more cash on hand, or because you chose to exercise a right the PUCT gives you (like disputing a bill). If the notice you received does not tie back to one of those specific triggers, you have standing to dispute it.

PUCT rules set a ceiling. For residential customers, the deposit cannot exceed the greater of:

- One-fifth of your estimated annual bill (in other words, roughly 2.4 months of usage), or
- Your estimated highest monthly bill in the 12-month period ahead.

The REP uses your usage history at that address, or at a comparable address if history is unavailable, to calculate both figures. They are required to take the larger of the two numbers and stop there. If a notice demands an amount that seems disproportionate to what you actually spend each month, request the calculation in writing. The provider must show its work.

For context on what bills look like in Texas right now: as of August 2026 in the Oncor/Dallas area at 1,000 kWh per month, advertised all-in rates range from roughly 6.8 cents per kWh on the low end to a median of about 16.1 cents per kWh across active plans, according to data tracked by ElectricRates.org for Texas. Your actual deposit ceiling depends on your individual usage and the rate on your EFL, not on market averages.

This is where many customers assume the money is just gone. It is not.

PUCT rules require the REP to return your deposit, plus accrued interest, after you demonstrate 12 consecutive months of on-time payments following the deposit. The interest rate is set annually by the PUCT and applied to the balance for every month the provider holds your funds.

The deposit must also be returned promptly when your account closes, applied first to any outstanding balance, with the remainder refunded to you. If the REP fails to return it within the timeframe the rules specify, you can file a complaint.

One practical note: the 12-month clock starts from the date the deposit is paid, not from the date you signed your original contract. So if you are seven months into a 12-month contract and you pay the deposit on time, you may be asked to hold the deposit past the end of your current contract term. That is legal. When your contract renews or you switch providers, ask explicitly what happens to the deposit balance.

Every licensed REP in Texas is required by the PUCT to provide an Electricity Facts Label (EFL) for every plan they sell. The EFL discloses pricing at the 500, 1,000, and 2,000 kWh usage tiers (the standard kWh-tier pricing structure) along with contract terms, early termination fees, and any deposit requirements that apply at enrollment.

The EFL you received when you signed your current plan is a binding disclosure document. Pull it up and read the deposit section. If the REP stated at enrollment that no deposit was required, and your circumstances have not changed in the ways PUCT rules allow, that disclosure matters in any dispute.

If you no longer have your EFL, you can retrieve it through powertochoose.org, the PUCT's official shopping site, by searching your provider and plan name. The EFL for your enrolled plan should be available there.

Start with the REP directly. Call customer service, ask them to explain the specific PUCT rule provision and the triggering event they are relying on, and request that explanation in writing. Document the date, the representative's name, and everything they say. Keep copies of your payment history, including bank statements showing when payments cleared.

If the REP cannot or will not justify the demand clearly, your next step is the PUCT's customer complaint process. The PUCT Office of Customer Protection handles disputes between Texas consumers and licensed REPs. Filing a complaint does not automatically suspend a deposit demand, but it creates an official record and requires the REP to respond formally.

While a dispute is open, continue paying your electricity bill on time. A disconnection notice during an active dispute has its own rules, and keeping your payment record clean strengthens your position regardless of the outcome on the deposit question.

You can also use the comparison tools at ElectricRates.org to see what other REPs are offering in your area. If your contract includes an early termination fee, weigh that cost against the deposit amount and any rate difference before deciding whether switching makes financial sense.

One thing that sometimes confuses Texas customers when they see a large bill (and start missing payments) is the TDU delivery charge. In Texas, the wires and poles are owned and operated by Transmission and Distribution Utilities: Oncor, CenterPoint Energy, AEP Texas, and TNMP, depending on where you live. These companies are regulated monopolies. They charge a pass-through delivery fee that appears on every electricity bill regardless of which REP you chose.

That delivery fee is not set by your REP and is not part of the rate you shopped for on Power to Choose. It is a PUCT-regulated charge that all REPs must collect and pass along. If your bill has grown and you are confused about why, separating the energy charge from the TDU delivery charge on your statement is the first step. The REP controls the energy portion; the TDU controls the delivery portion.

Understanding this split matters for deposit disputes because the REP can only base a deposit calculation on your total estimated bill, which includes the TDU component. If TDU rates have increased recently and your bills have grown as a result, that can affect the deposit ceiling even if your energy consumption has not changed.

If your current REP has demanded a deposit and you are weighing whether to stay or switch, there are a few things to keep in mind.

First, check your EFL for the early termination fee. If you are seven months into a 12-month plan, the ETF might be significant enough to outweigh the deposit amount or any rate improvement you could get by switching now.

Second, know that a new REP may also run a credit check at enrollment. Depending on your recent payment history, a new provider could also require a deposit at signup. The PUCT rules that govern deposit amounts and return timelines apply to all licensed REPs equally, so the terms of any new deposit would be subject to the same caps.

Third, compare plans carefully using the 500/1,000/2,000 kWh usage tiers on each EFL, not just the headline rate. Plans priced attractively at 2,000 kWh sometimes look very different at the 1,000 kWh tier that most households actually hit. As of August 2026 in the Oncor/Dallas area, the spread between the lowest advertised all-in rate and the median rate is substantial. Visit ElectricRates.org for current plans and pricing in your specific TDU territory.