Residential Electricity Pricing in Texas’s Competitive Retail Market

Using a large sample of residential retail electricity plans advertised on the Public Utility Commission of Texas’s Power-to-Choose website between during January 2014 to December 2018, our panel regression analysis finds changes in the projected wholesale price of electricity are not fully reflected as changes in these plans’ price quotes. The estimated rates of wholesale price pass-through range from 43% to 45%. Retailers tend to charge risk premia that increase with wholesale price volatility. Prepayment and time-of-use plans likely contain price premia. The price premia associated with higher-than-average renewable energy contents in the early years of our sample have largely vanished by 2018. Longer contract terms come at a higher price. Finally, increased customer switching tends to reduce retail price quotes, implying that Texas’s residential retail market can be made more price competitive through consumer education on plan choices and dissemination of credible price information.