How do business electricity rates work in Texas?

Finding the right energy plan to power your day-to-day activities is just as important to business-owners as it is to home-owners. The bottom line that both customers look for is to save costs while maximizing efficiency. While there may be (literally) over a hundred retail electricity providers (REPs) and plans to choose from, the good news is business-owners can take advantage of Texas’ deregulated energy market to shop around and find the best plan to suit their needs. So, what makes electricity rates for businesses special, and as a small-business owner, how can you identify the best plan for you when there are so many options to choose from?

Business Rates

First, it’s important to understand what constitutes a business. To qualify for a business energy plan, you must either own a commercial property or run a home business. Small businesses are those that employ 500 or fewer employees (but by some definitions, the size of a small business is much smaller, at 100 or fewer employees). 

Business rates depend on a few factors, including the size of your business, location, and average energy use and history.  

Overall, business rates are typically lower than residential rates, simply because businesses use a lot more energy than individual homes. On average, the price per kWh is slightly over 8 cents (whereas the national average is more than 10 cents per kWh! Texas sees cheaper rates thanks to its deregulated energy market). Business energy rates also differ between industry types, such as industrial (e.g., tools, lumber), transportation (e.g., taxi service), and retail. Each industry will have a different energy rate.

Finally, business rates will usually be higher in the summer than the rest of the year.

What do businesses pay for?

The rate that a small business will pay for their electricity consists of three primary costs:

  1. Wholesale: This includes the cost to set up electricity plants, poles, and wires that are needed to deliver electricity to your business, as well as any operating costs to maintain electricity plants and equipment.
  2. Supply: This is the cost of generating electricity and supplying it through electric wires and poles. The supply cost is what you read as “kWh” on your monthly electricity bill.
  3. Delivery: This typically means customer service and local distribution.

Depending on your business size and location, set up and delivery may be costly for the supplier, which is why you may see differences in rates between similar businesses.

Types of Plans and Discounts

Energy plans offered to businesses are usually either fixed rate, variable rate, or prepaid business plans. Businesses have the added advantage of benefiting from discounts if their day-to-day business activities result in high energy consumption. Some REPs may reduce your rate for higher average daily electricity use. There are also special offers on the market these days for businesses going green and committing to renewable energy plans. These renewable energy plans are also often eligible for tax credits, and can save your business some bucks at the end of the year.

As a business-owner, you have a lot on the go. While there may be over a hundred REPs in Texas, each with several plans to choose from, doing your research can land you the right plan that saves you time and money in the long-run. Arrow Energy can help you get started. Contact us to learn more about the business energy plans we can offer you.