Why Texas Electricity Rates Differ at 1000 kWh: Explained

You did your homework. Found a plan advertising 8.5¢/kWh on Power to Choose. Signed up feeling smart. Then your first bill arrives: 11.2¢/kWh. You did not misread anything. That advertised rate was real—just not real for your usage.

Texas electricity pricing uses a benchmark that rarely matches how you actually use power. The rate you see advertised assumes exactly 1,000 kWh monthly usage. Use more or less, and your effective rate changes—sometimes dramatically. This is not a scam. It is math. But it is math designed to confuse you into thinking you are getting a better deal than you actually are.

Power to Choose requires all providers to show rates at exactly 1,000 kWh. This creates an apples-to-apples comparison—in theory. In practice, it creates a gaming opportunity.

Providers know most Texans use 1,100-1,400 kWh monthly, not 1,000. So they engineer plans that look cheap at the benchmark but cost more at typical usage. Think of it like a car advertised at 50 MPG—technically true, but only if you drive exclusively downhill with a tailwind.

Many Texas electricity plans use tiered pricing, where your rate per kWh changes based on how much you use. The tiers are designed to look good at 1,000 kWh while penalizing both low and high usage.

A typical tiered structure might look like this: 8¢/kWh for the first 500 kWh, 10¢/kWh for 501-1,000 kWh, and 12¢/kWh for everything above 1,000 kWh. At exactly 1,000 kWh, this plan advertises 9¢/kWh average. But at 1,500 kWh? Your effective rate jumps to 10.3¢/kWh. At 2,000 kWh? You are paying 11¢/kWh.

Bill credits are lump-sum discounts you get when you use a certain amount. Use exactly 1,000 kWh and get a $50 credit! Sounds great until you realize you need to use exactly that amount—or lose the credit entirely.

Here is how a $50 credit at 1,000 kWh affects your effective rate: At 1,000 kWh, a 12¢/kWh base rate becomes 7¢/kWh effective ($120 bill minus $50 credit). At 999 kWh, you get no credit—12¢/kWh effective. At 1,001 kWh, the credit applies but your effective rate is 7.1¢/kWh.

The math works at the benchmark. Miss it by a single kWh and your effective rate jumps 70%.

Most Texas electricity plans include a monthly base charge—typically $5-$15—that you pay regardless of usage. This charge gets averaged into your per-kWh rate, and the math changes dramatically based on consumption.

A $10 monthly base charge on a 10¢/kWh plan: At 1,000 kWh, effective rate is 11¢/kWh ($10 spread across 1,000 kWh). At 500 kWh, effective rate is 12¢/kWh ($10 spread across fewer kWh). At 2,000 kWh, effective rate is 10.5¢/kWh ($10 spread across more kWh).

Base charges hurt low-usage customers the most. If you are in an apartment using 600 kWh monthly, that $10 base charge adds 1.7¢/kWh to your effective rate.

Every Texas electricity bill includes Transmission and Distribution Utility (TDU) charges—the cost of getting electricity from the power plant to your home. These charges pass through regardless of which retail provider you choose.

TDU charges typically add 3-5¢/kWh to your effective rate, but they are not always clearly disclosed in advertised rates. Some providers include TDU in their advertised rate; others do not. This makes comparing plans even more confusing.

Oncor (Dallas-Fort Worth area) charges roughly 3.8¢/kWh in delivery fees. CenterPoint (Houston) charges about 4.2¢/kWh. AEP Texas and TNMP have different structures. If your advertised rate excludes TDU, add 4¢/kWh to get your real cost.

Stop trusting advertised rates. Here is how to find your actual cost:

1. Get your Electricity Facts Label (EFL)—required by law for every Texas plan
2. Find your actual monthly usage from your last 12 bills
3. Calculate: (base rate × your usage) + base charges + credits (if applicable)
4. Divide total by your usage to get effective rate

Example: 10¢/kWh base rate, $10 monthly charge, $50 credit at 1,000 kWh. At 800 kWh: ($80 + $10 - $0) ÷ 800 = 11.25¢/kWh effective. At 1,000 kWh: ($100 + $10 - $50) ÷ 1,000 = 6¢/kWh effective. At 1,500 kWh: ($150 + $10 - $0) ÷ 1,500 = 10.67¢/kWh effective.

The best electricity plan for you depends entirely on how much power you use. Stop comparing at 1,000 kWh if that is not your reality.

For low-usage households (under 800 kWh): Look for plans with no or low base charges. Avoid plans with usage credits you will never reach. Tiered plans often hurt you—you are stuck paying higher first-tier rates.

For average households (1,000-1,400 kWh): Credits at 1,000 kWh might work if you can hit the target. Watch for steep rate jumps above 1,000 kWh. Consider flat-rate plans for predictability.

For high-usage households (over 1,500 kWh): Look for credits at 2,000 kWh if you can reach them. Base charges matter less when spread across high usage. Avoid tiered plans with expensive upper tiers.