What Is a Good kWh Rate for a Business in Texas?

The Benchmarks Your Provider Will Never Share

The Texas commercial electricity average is 9.12 cents/kWh for the energy-only portion. If your rate is below that, you are ahead of the majority. If your rate is at 6 cents or below, you are in the top tier of Texas commercial accounts. But “good” depends on three variables that generic rate comparisons ignore: how much electricity your business uses per month, which TDU territory your meter sits in, and whether the number you are comparing is the energy-only rate or the all-in cost that includes delivery charges.

Most business owners compare the wrong number. They look at their total bill, divide by kWh, and compare that blended rate to the energy-only rate advertised by providers. That comparison always makes your current plan look expensive and the advertised plan look cheap. Here is how to benchmark your commercial electricity rate against what Texas businesses actually pay, broken down by the factors that determine whether your rate is competitive.

Where Your Business Falls

Texas commercial electricity rates cluster into three tiers based on monthly consumption. Your tier determines what “good” looks like.

Small commercial (under 50,000 kWh/year or roughly under 4,200 kWh/month): Energy-only rates for this tier run 8 to 11 cents/kWh. A good rate is anything below 9 cents. An excellent rate is below 7.5 cents. This tier pays the highest per-kWh energy rates because providers build more margin into plans for smaller accounts. The fixed costs of servicing an account are roughly the same whether that account uses 3,000 kWh or 30,000 kWh per month, so the per-unit overhead on small accounts runs 2 to 3x higher.

Mid-market commercial (50,000 to 500,000 kWh/year or roughly 4,200 to 42,000 kWh/month): Energy-only rates for this tier run 6 to 8 cents/kWh. A good rate is below 7 cents. An excellent rate is below 6 cents. This is the tier where rate shopping delivers the largest absolute dollar savings. A 1-cent/kWh improvement on 20,000 kWh/month saves $200/month or $4,800 over a 24-month contract.

Large commercial (over 500,000 kWh/year or over 42,000 kWh/month): Energy-only rates for this tier run 4.5 to 6.5 cents/kWh. A good rate is below 5.5 cents. An excellent rate is below 5 cents. At this volume, businesses typically work with brokers or negotiate directly with retail electricity providers. Custom pricing replaces published rate plans, and the purchasing power from high volume pushes rates well below what small and mid-market accounts can access.

These tiers are not arbitrary. They reflect the economic reality of how Texas retail electricity providers price commercial accounts. Higher volume means lower per-unit costs for the provider, which translates to lower rates for the customer.

Energy-Only vs. All-In and the Comparison Most Business Owners Get Wrong

The single biggest source of confusion in commercial electricity pricing is the difference between the energy-only rate and the all-in cost per kWh. Every advertised rate, every provider quote, and every “low rate” claim refers to the energy-only portion. Your actual cost per kWh is 40 to 60% higher than that number.

Your total electricity bill has two main components. The energy charge comes from your retail provider and reflects the per-kWh rate you shopped for. The delivery charge comes from your TDU (Oncor, CenterPoint, AEP Texas, or TNMP) and covers transmission and distribution of electricity to your meter. The delivery charge is identical regardless of which provider you choose. It is regulated by the Public Utility Commission of Texas and passed through dollar for dollar.

When delivery charges are included, the all-in cost for Texas commercial electricity typically runs 11 to 15 cents/kWh. If your energy-only rate is 7 cents/kWh, your all-in cost is probably 11 to 13 cents/kWh depending on your TDU and rate class.

Here is the comparison that matters: pull your total bill, divide by total kWh consumed, and that is your all-in rate. Then compare that number to these all-in benchmarks by tier.

Small commercial all-in: 12 to 16 cents/kWh. Good is below 14 cents. Mid-market all-in: 10 to 13 cents/kWh. Good is below 12 cents. Large commercial all-in: 8 to 11 cents/kWh. Good is below 10 cents.

If your all-in rate falls within the “good” range for your tier, your plan is competitive. Switching providers changes only the energy portion, not the delivery portion, so the potential savings from switching are limited to the 50 to 60% of your bill that represents the energy charge.

How Your TDU Territory Affects What “Good” Means

Texas has five TDU territories, and each one charges different delivery rates. Two businesses with identical energy-only rates can have all-in costs that differ by 1 to 3 cents/kWh purely because of their TDU assignment.

Oncor (Dallas-Fort Worth, much of North Texas): Oncor delivery charges are moderate, making all-in costs roughly 3 to 5 cents above the energy rate. Oncor serves the largest number of commercial accounts in Texas and offers the widest selection of competing providers after CenterPoint.

CenterPoint (Houston metro): CenterPoint delivery charges run slightly higher than Oncor. Houston businesses should expect all-in costs 3.5 to 5.5 cents above their energy rate. The tradeoff is that CenterPoint territory has the deepest pool of competing providers in the state, which drives energy-only rates lower.

AEP Texas (South Texas, West Texas, Corpus Christi): AEP delivery charges vary more by rate class but are generally comparable to CenterPoint. Businesses in AEP territory often have fewer provider options, which can push energy-only rates 0.5 to 1 cent higher than DFW or Houston.

TNMP (scattered areas across Texas): TNMP territory includes parts of Central Texas and the Gulf Coast. Delivery charges are competitive with Oncor in most rate classes.

Lubbock Power & Light: Lubbock operates its own municipal utility and is not part of the deregulated ERCOT market. Lubbock businesses cannot choose their electricity provider and pay rates set by the city utility.

Your TDU territory is determined by your physical location. You cannot change it. But knowing your TDU’s delivery charge structure helps you calculate whether a lower energy rate from a new provider actually reduces your all-in cost enough to justify the switch.

When Contract Timing Determines Whether Your Rate Is “Good”

The same energy rate can be excellent or mediocre depending on when you locked it in. Texas commercial electricity rates fluctuate based on natural gas prices, ERCOT wholesale market conditions, seasonal demand, and forward price expectations.

Rates locked during winter months (November through February) have historically been 10 to 20% lower than rates locked during summer months (June through August). This is not a rule. It is a pattern driven by the fact that summer demand tightens ERCOT supply margins, which pushes forward prices higher. Providers price summer risk into every contract offered between May and September.

If you locked a 24-month contract at 7 cents/kWh during March 2025, that was a competitive rate at the time. If the market has since dropped to 5.5 cents/kWh for similar terms, your rate is no longer “good” by current standards, but you are locked in and should not pay an early termination fee to chase a marginally better rate. The math rarely works out.

The honest assessment: a rate locked 12+ months ago may look expensive compared to today’s market. That does not mean you made a bad decision. It means the market moved. The question is whether the gap between your rate and the current market justifies an early termination fee and a new contract.

For most businesses, the answer is no unless the gap exceeds 2 cents/kWh and you have more than 12 months remaining on your current term. At 2 cents/kWh on 10,000 kWh/month, you save $200/month. If your early termination fee is $1,500 and you have 18 months left, you save $3,600 minus $1,500, netting $2,100. That math works. At 0.5 cents/kWh, the same calculation nets $400 over the remaining term. That does not justify the hassle.

What the National Average Tells You (and What It Hides)

The U.S. average commercial electricity rate is approximately 14.12 cents/kWh. The Texas average is 9.12 cents/kWh. Texas commercial rates run roughly 35% below the national average.

This gap exists because Texas operates its own deregulated wholesale market (ERCOT), has abundant natural gas supply, massive wind generation capacity, and growing solar capacity. The combination of competition among retail providers and low-cost generation sources keeps Texas commercial rates well below states like California (22 to 28 cents/kWh), New York (18 to 24 cents/kWh), and Connecticut (20 to 26 cents/kWh).

But the national average is not a useful benchmark for Texas businesses. Comparing your Texas rate to the national average creates a false sense of comfort. You are not competing against California businesses for electricity costs. You are competing against the other Texas business on your block that may be paying 2 to 3 cents/kWh less for the same commodity.

The relevant comparison is always within Texas, within your TDU territory, and within your usage tier. A 9-cent rate looks great next to the national average. It looks less impressive when the best available rate for your usage level is 5.5 cents in the same territory.

How to Determine If Your Current Rate Is Actually Good

Five steps. Ten minutes. No provider calls required.

Step 1: Find your energy-only rate. Look at the energy charges section of your bill. Divide total energy charges by total kWh. This is your effective energy rate. Ignore any “average price per kWh” that includes delivery, as that is your all-in rate, not the number you compare to advertised plans.

Step 2: Identify your usage tier. Add up your annual kWh consumption from the last 12 bills. Under 50,000 kWh/year is small commercial. 50,000 to 500,000 is mid-market. Over 500,000 is large commercial.

Step 3: Compare to your tier benchmark. Is your energy-only rate below the “good” threshold for your tier? If yes, your rate is competitive. If your rate exceeds the tier average, the gap between your rate and the benchmark represents your potential savings per kWh.

Step 4: Calculate the dollar impact. Multiply the gap between your rate and the benchmark by your monthly kWh. Then multiply by your remaining contract months. This is the total cost of staying at your current rate versus what a competitive plan would cost.

Step 5: Check your contract end date. If your contract expires within 60 to 90 days, comparing new plans now captures current market pricing. If expiration is 6+ months away, set a calendar reminder for 90 days before renewal.

The Bottom Line on What Constitutes a Good Rate

A “good” Texas commercial electricity rate is below 9 cents/kWh energy-only for small businesses, below 7 cents for mid-market, and below 5.5 cents for large commercial accounts. But the number that determines your actual electricity cost is the all-in rate, which runs 3 to 6 cents/kWh higher than the energy-only rate depending on your TDU territory.

If your energy rate is competitive for your tier and your contract timing was reasonable, you are paying what the market supports. If your rate exceeds your tier benchmark by more than 1.5 cents/kWh and your contract is expiring soon, the savings from switching are real and quantifiable.

See where your rate falls when you enter your ZIP code and usage level on Compare Power.

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