Texas Commercial Electricity Rates & Procurement Guide (2026): ERCOT, REPs & 4CP

Texas is the most competitive electricity market in the country, and for commercial customers that's mostly good news. The average Texas business paid about 8.35¢/kWh in April 2026 — among the lowest commercial rates of any state and dramatically below high-cost markets like Massachusetts (24¢) or California (26¢). But Texas is also uniquely complex: there's no traditional utility to fall back on in the competitive area, you buy from a Retail Electric Provider (REP), and large customers face a peculiar and expensive quirk called 4CP that can be managed for real savings. This guide explains how to procure smart in Texas.

How the Texas (ERCOT) Market Works

About 85% of Texas load sits inside ERCOT — the Electric Reliability Council of Texas — an "energy-only" competitive market that operates separately from the rest of the U.S. grid. In the competitive ERCOT area, the roles are unbundled:

• TDU/TDSP (Transmission & Distribution Utility): Oncor, CenterPoint, AEP Texas, or TNMP owns the poles and wires, reads your meter, and restores power. You can't choose your TDU — it's set by geography — and its delivery charges are regulated and passed through on every bill.
• REP (Retail Electric Provider): who you buy your electricity from and contract with. This is the competitive part — you can and should shop REPs for your commercial supply.
• ERCOT: operates the grid and wholesale market.

Because ERCOT is energy-only (no centralized capacity market like PJM), commercial prices track wholesale energy and scarcity pricing. That keeps baseline rates low but exposes the market to summer price spikes during extreme heat. See our Texas electricity market business guide and ERCOT summer 2026 outlook.

Note: parts of Texas — including areas served by El Paso Electric, and some municipal utilities and co-ops (like Austin Energy and CPS Energy in San Antonio) — are not deregulated. Commercial choice applies in the competitive ERCOT area.

What Texas Businesses Actually Pay

At ~8.35¢/kWh average, Texas commercial rates are low, but your effective cost depends on:

• Your load profile and load factor. ERCOT rewards steady, high-load-factor usage; peaky loads pay more via 4CP and higher energy prices during scarcity.
• Contract timing. Summer forward prices carry a heat premium. Locking in the fall or winter for a summer-inclusive term is often cheaper.
• TDU delivery charges. Regulated and non-shoppable — the same regardless of REP.

Compare Texas against other states in the commercial electricity rates by state table, and estimate demand exposure with the demand charge calculator.

4CP: The Texas Quirk That Can Save Large Customers Real Money

Here's the single most important concept for large commercial and industrial customers in ERCOT: 4CP (Four Coincident Peak).

ERCOT sets each large customer's transmission cost allocation for the following year based on their demand during the four 15-minute intervals when total ERCOT demand peaks — one in each of June, July, August, and September. These four moments, almost always on the hottest late-afternoon hours of summer, determine your transmission charges (4CP charges) for all of next year.

The payoff: if you can curtail load during those four peak intervals, you reduce your 4CP allocation and cut transmission costs for a full year. Businesses do this by:

• Subscribing to a 4CP forecasting/notification service (many REPs and consultants offer it).
• Shifting or reducing production during predicted peak windows on the hottest summer afternoons.
• Discharging battery storage during 4CP intervals to shave grid demand. See commercial battery storage ROI guide.

For a facility with significant demand, successful 4CP avoidance can save tens of thousands of dollars a year. It's the ERCOT equivalent of coincident-peak management in other markets — see demand charge management.

How to Lock a Competitive Texas Commercial Rate

1. Know your usage. Pull 12 months of interval data (your REP or TDU can provide it). Your load shape drives your price. See commercial energy load profile guide.
2. Solicit multiple REPs competitively. Don't just renew with your incumbent. Fixed all-in rates are the norm for commercial; make sure pass-through TDU charges and any 4CP/ancillary charges are clearly defined. See comparing supplier offers and pass-through charges.
3. Scrutinize the contract, not just the headline rate. Watch for bandwidth/swing tolerances, "market re-pricing" clauses tied to ancillary or congestion costs, and early-termination fees. See bandwidth clauses explained.
4. Time it for the off-season. Locking a summer-inclusive term in fall/winter usually beats buying in the heat of summer. See best time to lock in electricity rates.
5. Plan 4CP management if you're a large user — it's a separate, ongoing savings lever beyond the commodity rate.

Serving businesses in Houston, Dallas, Fort Worth, Austin (competitive areas), San Antonio, El Paso, and across the state. See city guides for Houston, Dallas, and Fort Worth, and our Texas state overview.

Frequently Asked Questions

What is the average commercial electricity rate in Texas in 2026? About 8.35¢/kWh (EIA, April 2026) — one of the lowest commercial rates in the U.S. and the lowest among fully deregulated states. Your actual rate depends on your load profile, TDU territory, contract timing, and demand.

What is a Retail Electric Provider (REP) in Texas? In the competitive ERCOT area, the REP is the company you buy electricity from and sign your contract with. Your transmission and distribution utility (Oncor, CenterPoint, AEP Texas, or TNMP) still delivers the power and handles outages, but you shop REPs for competitive supply.

What is 4CP and why does it matter for my business? 4CP (Four Coincident Peak) is how ERCOT allocates transmission costs to large customers, based on your demand during the four 15-minute grid-peak intervals across June–September. Curtailing load during those peaks lowers your transmission charges for the entire following year — a significant savings lever for large commercial and industrial users.

Is all of Texas deregulated? No. The competitive ERCOT area (most of the state, including Houston, Dallas, Fort Worth) is deregulated. Areas served by municipal utilities (Austin, San Antonio), electric co-ops, and El Paso Electric are generally not deregulated for choice.

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Get competitive REP quotes and a 4CP strategy tailored to your Texas facility. Request a free Texas rate review or call 833-264-7776.

Sources: U.S. Energy Information Administration, Electric Power Monthly Table 5.6.A (April 2026); ERCOT market design and 4CP transmission cost allocation methodology.