Texas Electricity Glossary & Energy Knowledge Base

An aggregator joins two or more electricity customers into a purchasing unit to negotiate the purchase of electricity from Retail Electric Providers (REPs). In Texas, an entity providing aggregation services must meet applicable Public Utility Commission of Texas registration requirements.

An aggregator acts on the buyers' side of the transaction. It does not sell or take title to the electricity itself. A single customer negotiating electricity for multiple locations that it owns or controls is not considered an aggregator simply because it has multiple meters or premises.

Ancillary Services are reliability services ERCOT procures to help keep electricity supply and demand balanced and the Texas electric grid operating reliably.

These services can respond in seconds or minutes when generation suddenly drops, electricity demand changes, or grid frequency needs support. Qualified generators, batteries, and certain large electric loads can provide ancillary services.

Examples of ERCOT Ancillary Services

• Regulation Up and Regulation Down
• Responsive Reserve Service (RRS)
• ERCOT Contingency Reserve Service (ECRS)
• Non-Spinning Reserve (Non-Spin)

For many retail customers, these costs are incorporated into the electricity price. Some commercial electricity contracts may pass through certain ERCOT or wholesale-market charges, so the contract language should be reviewed carefully.

A base charge is a recurring fixed charge that may appear on a retail electricity plan regardless of how many kilowatt-hours (kWh) the customer uses during the billing cycle.

A REP base charge is different from TDU delivery charges. Some plans have no REP base charge, while others use a monthly base charge as one part of the total electricity price.

Customer tip: Review the Electricity Facts Label (EFL), not just the advertised cents-per-kWh rate. A monthly base charge can have a noticeable effect on the effective electricity rate, especially at lower usage levels.

A bill credit is a plan-specific credit that reduces the electric bill when the customer meets conditions stated in the Electricity Facts Label (EFL) or Terms of Service.

Some Texas retail electricity plans use usage-based bill credits. For example, a plan may provide a credit only when monthly electricity consumption reaches a specified kWh amount or falls within a specified range. That can make the average price attractive at one usage level but substantially different above or below that level.

Customer tip: Compare a bill-credit plan against your actual historical monthly electricity usage instead of assuming the 500, 1,000, or 2,000 kWh examples on an EFL will match your home.

A person cannot provide brokerage services, including brokerage services offered online, in Texas for compensation or other consideration unless the person is registered with the Public Utility Commission of Texas (PUCT). Individual employees and agents of broker firms and persons acting as agents of Retail Electric Providers (REPs) are generally not required to register separately as brokers. A REP is not permitted to register as a broker and is prohibited from knowingly providing bids or offers to a person providing brokerage services who is required to be registered but is not registered.

Retail Electric Providers (REPs) have notice and disclosure requirements when a residential or small commercial electricity contract is approaching expiration. Customers should review the contract expiration notice, renewal offer, Early Termination Fee terms, and the date on which a termination penalty no longer applies under applicable PUCT rules.

Tip: Do not wait until the final day of a fixed-rate electricity contract to compare renewal options. Reviewing plans before expiration can help avoid being placed on a higher variable or holdover rate.

Cramming is the addition of unauthorized charges to a customer's electric bill without the customer's approval. Unauthorized billing practices can be subject to enforcement by the Public Utility Commission of Texas.

Critical Care status in Texas provides additional protections and notifications for qualifying electricity customers when a person at the premises has a life-threatening medical condition or relies on certain life-support equipment. Qualification is handled through the applicable Transmission and Distribution Utility (TDU/TDSP) under PUCT rules.

The application generally requires certification by a physician and must be submitted according to the instructions for the applicable TDU.

Demand charges are an important part of many commercial electricity bills. Unlike an energy charge based on total kilowatt-hours (kWh), a demand charge is based on the customer's highest measured power demand, commonly expressed in kilowatts (kW), during a defined interval in the billing cycle.

Why demand charges matter

• They reflect the capacity needed to serve a customer's peak electrical load.
• They are separate from total energy consumption charges.
• Restaurants, manufacturing facilities, churches, offices, and other businesses with large simultaneous loads can see significant demand charges.

What is 4CP?

Four Coincident Peak (4CP) refers to ERCOT's four summer system peak intervals used in certain transmission cost allocation calculations. Large commercial and industrial customers may pay close attention to potential 4CP intervals because reducing coincident demand can affect future transmission-related costs depending on the customer's tariff and service arrangement.

Ways businesses can manage demand

• Stagger the startup of large equipment.
• Optimize HVAC schedules and controls.
• Identify short-duration demand spikes using interval usage data.
• Evaluate efficiency, load management, storage, or operational changes where practical.

A Retail Electric Provider (REP) may require a residential customer to establish satisfactory credit before beginning electric service. If satisfactory credit cannot be established, the REP may require a deposit. However, Texas customers may have several ways to avoid paying a cash deposit or establish satisfactory credit, depending on the REP and the customer's circumstances.

Ways a Texas Residential Customer May Avoid a Deposit

1. Good electric payment history. For an affiliated REP or Provider of Last Resort (POLR), a customer may establish satisfactory credit if the customer:
   • was a customer of a REP or electric utility within the previous two years,
   • is not currently delinquent on that electric account, and
   • was late paying no more than once during the last 12 consecutive months of service.
   A customer may be asked to provide a payment-history or letter-of-credit document from the previous electric provider.
2. Satisfactory credit rating. An affiliated REP or POLR may consider a satisfactory credit rating obtained through a consumer reporting agency as evidence of satisfactory credit.
3. Age 65 or older. A residential customer or applicant who is 65 years of age or older and is not currently delinquent on an electric service account may qualify to have the deposit requirement waived.
4. Victim of family violence. A qualifying victim of family violence may establish satisfactory credit by submitting the required certification documentation. The certification must meet PUCT requirements and generally must be completed or supported by an authorized organization or professional, such as a family-violence center, treating medical personnel, law enforcement, certain government attorneys, or another qualifying authority.
5. Medically indigent customer. Under the PUCT rule applicable to an affiliated REP or POLR, a customer may qualify as medically indigent when the required documentation is provided annually and:
   • household income is at or below 150% of the federal poverty guideline, as certified by a governmental entity or government-funded energy-assistance program provider; and
   • the customer or spouse is certified as unable to perform three or more activities of daily living, or monthly out-of-pocket medical expenses exceed 20% of the household's gross income.
6. Letter of Guarantee instead of a cash deposit. When an affiliated REP or POLR requires an initial residential deposit, it must offer the customer the option of providing a qualifying written Letter of Guarantee instead of paying the cash deposit. The guarantor generally must meet the REP's requirements and agrees to responsibility under the written guarantee agreement. Other REPs may also offer a guarantee option.

Important REP-Specific Rule

Deposit and credit requirements can vary by Retail Electric Provider. Under PUCT rules, a competitive REP that is not an affiliated REP or POLR must recognize certain protections, including qualifying customers who are age 65 or older and qualifying victims of family violence, and the REP may establish additional nondiscriminatory methods for demonstrating satisfactory credit.

Customer tip: If a REP requests a deposit, ask the provider to explain every available method for establishing satisfactory credit or avoiding the cash deposit before paying it. The REP may have additional options beyond those listed above.

An Early Termination Fee (ETF) is a fee that may apply when a customer ends a term electricity contract before the contract allows termination without a penalty. The amount or calculation method should be disclosed in the Electricity Facts Label (EFL), Terms of Service, or other applicable contract documents.

Texas customer-protection rules provide specific protections and exceptions for qualifying residential customers, including certain situations involving a move from the service location. Residential and small commercial customers also have protections as a term contract approaches its expiration date.

Customer tip: Before switching Retail Electric Providers, confirm both your contract expiration date and your ETF. A lower new electricity rate may not offset a large termination charge on the existing contract.

An Electricity Facts Label (EFL) is a standardized disclosure required for many Texas retail electricity products. It helps customers compare plan pricing, contract terms, fees, renewable content, and other important plan information. Residential EFLs commonly show average price examples at 500 kWh, 1,000 kWh, and 2,000 kWh of monthly usage.

ERCOT stands for the Electric Reliability Council of Texas. ERCOT operates the electric grid and wholesale electricity market for most of Texas and coordinates grid reliability, market operations, and the balance of electricity supply and demand within the ERCOT region.

An ESI ID (Electric Service Identifier) is the unique identifier assigned to an electric service location in the Texas competitive retail electricity market. It is commonly a 17- or 22-digit number and can usually be found on the customer's electric bill. An ESI ID identifies the service point or premise rather than the individual customer.

A fixed-rate electricity plan generally provides a defined energy price or pricing formula for the term of the contract, subject to the specific terms shown in the Electricity Facts Label and Terms of Service. TDU delivery charges, taxes, fees, usage levels, bill credits, or other components can still affect the total bill depending on the product.

A kilowatt-hour (kWh) is a unit of energy equal to using 1,000 watts of power for one hour. Retail electricity consumption is typically billed in kilowatt-hours. For example, a 1,000-watt appliance operating for one hour uses approximately 1 kWh of electricity.

A Letter of Authorization (LOA) is a document that gives a named person or company permission to perform specified actions on a customer's behalf. In the Texas electricity market, an LOA may be used when a Retail Electric Provider, broker, consultant, aggregator, or other authorized party requests customer information such as historical electricity usage.

A Letter of Credit from a previous electric provider may help a customer establish satisfactory credit with a new provider when the letter meets the new provider's requirements and applicable PUCT rules. It commonly documents payment history, including whether the customer had late payments, disconnections for nonpayment, or returned payments during the relevant service period.

A Letter of Exclusivity (LOE) is a document commonly used in commercial electricity procurement in which a customer identifies one electricity broker or consultant as its exclusive representative for a stated purpose, group of accounts, and period of time.

An LOE can help eliminate confusion when multiple brokers are requesting electricity prices for the same business. Retail electricity suppliers may use the document to determine which broker is authorized to represent the customer while pricing, negotiating, or presenting commercial electricity offers.

Letter of Exclusivity vs. Letter of Authorization

A Letter of Authorization (LOA) generally authorizes a broker, consultant, REP, or other party to obtain information or perform specifically listed actions for the customer. A Letter of Exclusivity (LOE) goes further by stating that the named broker or consultant is the customer's exclusive representative for the scope described in the document.

Important: Customers should read the scope, expiration date, cancellation language, accounts covered, and authority granted before signing any exclusivity document.

Load factor measures how consistently a customer uses electricity compared with the customer's highest demand during a period. It is especially useful when evaluating commercial and industrial electricity usage.

A business with steady electricity consumption throughout the month generally has a higher load factor. A business that has brief periods of very high demand but much lower usage the rest of the time generally has a lower load factor.

Basic formula:
Average Demand ÷ Peak Demand × 100

Load factor can affect how suppliers evaluate a commercial account because two businesses using the same total kWh can have very different demand profiles and wholesale supply costs.

A meter multiplier is used when the meter's displayed or registered value represents only a portion of the actual electrical usage or demand.

Residential and small commercial meters

Many meters directly register the full amount of usage.

Large commercial and industrial meters

Instrument transformers may be used so the meter records a scaled value. The meter multiplier converts that registered value into the actual billed usage or demand.

Basic calculation: (Current reading − Previous reading) × Meter Multiplier

Natural gas prices are an important electricity-market input because natural-gas-fired generation frequently influences wholesale electricity prices in Texas. Natural gas futures represent agreements to buy or sell natural gas at a specified price for delivery during a future period. Prices can be influenced by supply and demand, production, storage levels, pipeline constraints, weather, LNG exports, economic activity, and other market conditions.

Nodal charges are costs associated with the ERCOT nodal wholesale market, including location-related congestion and electrical losses. Locational Marginal Prices (LMPs) can vary by location because transmission constraints and losses affect the cost of delivering electricity across the grid.

How these costs affect a retail customer depends on the electricity product and contract structure. Some fixed-price products incorporate wholesale-market risks into the contracted price, while some pass-through or index-style products may expose the customer more directly to market components.

Important: Commercial customers should review contract language carefully so they understand which ERCOT, congestion, loss, ancillary-service, and other market charges are fixed, bundled, or passed through.

ERCOT's nodal market is the wholesale electricity-market design that uses location-specific pricing at electrical nodes and other settlement points. The design is intended to reflect transmission congestion, losses, and the cost of serving electricity at different locations on the grid.

Power to Choose is the electricity plan comparison website operated by the Public Utility Commission of Texas for residential and small commercial customers in areas of Texas open to retail electric competition.

The website allows eligible customers to compare electricity plans offered by participating Retail Electric Providers (REPs). Customers should review the Electricity Facts Label, Terms of Service, contract length, Early Termination Fee, bill credits, base charges, renewable content, and other plan details rather than selecting a plan based only on the advertised average price.

A Provider of Last Resort (POLR) is a backup retail electricity provider that may serve customers when their current Retail Electric Provider exits the market or can no longer provide service. Customers placed with a POLR may generally choose another eligible competitive REP rather than remain on POLR service.

PUCT stands for the Public Utility Commission of Texas. The Commission regulates important aspects of Texas electric, telecommunications, water, and sewer utility service and oversees customer-protection and competitive-market rules for the Texas retail electricity market.

Renewable energy is energy produced from resources that are naturally replenished over relatively short periods.

Common renewable energy resources

• Solar energy
• Wind energy
• Hydroelectric energy
• Geothermal energy
• Biomass and certain biomass-derived fuels

A Retail Electric Provider (REP) is a company authorized to sell retail electricity to customers in the competitive areas of Texas. The REP handles the retail electricity product, enrollment, billing, customer service, and contract relationship. The local Transmission and Distribution Utility (TDU/TDSP), not the REP, owns and maintains the poles, wires, meters, and local delivery system.

A residential electricity customer is generally an end-use customer who uses electricity at a residence for personal, family, or household purposes. Residential service is one of the common electric customer classes, alongside commercial and industrial service.

For certain Texas retail electricity switch enrollments, a customer may have a limited period in which the enrollment can be rescinded without a penalty or fee, subject to the applicable PUCT rule and the enrollment method. The right of rescission generally applies to qualifying switch requests and does not apply in the same way to move-in requests.

Important: Customers should review the Terms of Service and enrollment disclosures immediately because the rescission period is time-sensitive.

Slamming is the unauthorized switching of a customer's Retail Electric Provider without the customer's valid authorization. Unauthorized switches are prohibited and can be subject to PUCT enforcement and customer remedies.

Smart Meter Texas (SMT) is a data platform that provides eligible Texas customers and authorized users access to advanced-meter electricity usage information. Customers can use interval data to review consumption patterns, and they may authorize certain third parties to access information subject to SMT processes and permissions.

SMT is associated with participating Texas Transmission and Distribution Utilities and supports residential and small-business advanced-meter data access.

A switch hold can prevent an electricity account at a premise from being switched to another Retail Electric Provider until the condition causing the hold is resolved.

Common reasons for a switch hold

• A customer entered into a qualifying deferred payment arrangement with a REP.
• A TDU determined that meter tampering or certain related charges apply at the premise.

The party that placed or controls the hold must follow the applicable process to have it removed once the requirements are satisfied.

TDU Delivery Charges are regulated charges assessed for delivering electricity over the local transmission and distribution system. These charges help pay for poles, wires, transformers, meters, transmission facilities, system maintenance, and other delivery infrastructure.

The customer's Retail Electric Provider (REP) normally collects the applicable TDU charges on the electric bill and remits them through the market process. The REP does not set the regulated TDU tariff.

TDU delivery charges may include a monthly customer charge and one or more usage- or demand-based charges, depending on the customer class and applicable tariff.

Customer tip: TDU delivery charges are different from the REP's energy charge, although the Electricity Facts Label's average-price examples generally incorporate applicable recurring TDU delivery charges.

The Terms of Service (TOS) is a contract document that describes the rights and responsibilities of the Retail Electric Provider and customer. It can include the contract term, pricing provisions, fees, payment requirements, cancellation provisions, renewal terms, and other important conditions of electric service.

A Transmission and Distribution Utility (TDU), also called a Transmission and Distribution Service Provider (TDSP), is responsible for the local delivery infrastructure in its certificated service territory. The TDU maintains poles, wires, transformers, meters, and related equipment; responds to local outages and emergencies; and charges regulated delivery rates approved through the applicable regulatory process.

In competitive areas of Texas, the customer chooses a Retail Electric Provider, while the TDU continues to deliver the electricity.

A variable-rate electricity plan is a product in which the price can change after the applicable billing period or according to the plan's pricing terms rather than remaining fixed for a long contract term. Customers should review the Electricity Facts Label and Terms of Service to understand how and when the price may change, whether there are caps or formulas, and what notices apply.

The wholesale electricity market is where electricity and related grid services are bought, sold, scheduled, and financially settled before electricity is ultimately sold to retail customers.

In most of Texas, ERCOT operates the competitive wholesale power market. Market participants buy and sell electricity through mechanisms that include the Day-Ahead Market and Real-Time Market, while ERCOT also procures ancillary services needed for grid reliability.

Wholesale prices can change rapidly based on electricity demand, available generation, fuel prices, weather, transmission congestion, outages, renewable generation, and other grid conditions.

Why customers and brokers care: Wholesale-market conditions influence the prices and risk premiums that Retail Electric Providers offer in fixed-rate, indexed, and commercial electricity contracts.