A Texas residential customer shops electricity once every 12 to 24 months and saves $200 to $600 per year. A small business in deregulated Texas shops once every 1 to 5 years and saves $3,000 to $50,000. The mechanics are different. The stakes are different. Most Texas small business owners treat commercial procurement like residential and leave significant money on the table.
Here is how to think about it correctly.
Commercial Rate Structure in Texas: Three Components
Residential electricity bills have two main parts (supply and TDU delivery). Commercial bills in deregulated Texas have three:
Energy charge (cents per kWh). Just like residential, this is what the REP competes on. Set by your retail contract. For a typical small commercial customer (a retail store, restaurant, professional office), the energy charge runs 7 to 12 cents per kWh.
Demand charge ($ per kW). A fee based on your highest 15-minute average power draw during the billing period — or sometimes the highest in the past 12 months ("ratchet" demand). Set by the TDU and applied to commercial accounts above certain size thresholds. A bakery whose 15 kW oven runs 30 minutes a day can pay more in demand charges than in energy charges.
TDU customer charges and rider fees. Fixed monthly fees plus tariff adjustments. Smaller absolute dollars but a known floor regardless of usage.
For most Texas small businesses with monthly peak demand under 50 kW, demand charges represent 20 to 40% of the total bill. For demand-heavy businesses — machine shops, restaurants with large reach-in coolers, commercial laundries, dry cleaners — it can reach 50%+.
When Texas Businesses Qualify for Commercial Rates
The default residential/commercial cutoff in Texas is roughly 12 kW peak demand or 5,000 kWh monthly average usage. Above those thresholds, the TDU assigns you to a commercial rate class — which means demand charges, different TDU service tariffs, and often different REP offerings.
You can check your rate class on your current bill: it'll say something like "Secondary Service Less Than 10 kW" (small commercial) or "Secondary Service Greater Than 10 kW" (medium commercial). Larger facilities fall into "Primary Service" categories.
If your business is small enough that you're still on a residential or small commercial tariff (no demand charge), shop like a residential customer. Power to Choose lists small commercial offerings.
Why Supplier Shopping Matters More for Businesses
The energy charge — the part REPs compete on — represents larger absolute dollars for commercial customers. A 0.5 cent per kWh improvement on 300,000 kWh annual usage is $1,500. The same improvement on a residential 14,400 kWh is $72.
Translation: the same shopping discipline that saves a Texas household one dinner out per month saves a Texas restaurant a part-time hire.
This dynamic also explains why commercial REPs run a different sales motion. Residential customers shop via Power to Choose; commercial customers usually shop via brokers who solicit bids from 5 to 15 REPs on your behalf, direct REP sales reps who quote your specific usage profile, or custom RFP processes for medium-to-large customers (1+ million kWh per year).
A Texas commercial REP quote is typically term-specific (12, 24, 36 months), usage-specific (within a band like 80-120% of forecast load), and good for 24 to 72 hours. Residential rate cards don't move that fast.
Contract Length: The 24-to-36-Month Question
Residential fixed-rate Texas plans top out at 60 months but are rarely useful past 24. For Texas commercial customers, 36 months is often optimal.
Reasons to go long (24-36 months): Budget predictability for owners and CFOs; locked rates protect against fuel-cost spikes that hit business bottom lines harder; lenders sometimes require utility-cost certainty in covenant calculations; hedging value against ERCOT wholesale volatility.
Reasons to stay shorter (12-18 months): You expect to move, downsize, or close in under 2 years; you're investing in solar, batteries, or major efficiency upgrades that will dramatically reshape your load curve; ERCOT wholesale forwards are clearly elevated and you expect them to revert; your business is growing fast and load forecasts are unstable.
Default for stable Texas businesses: 24 to 36 months. The longest contracts (48-60 months) only make sense if you have very high confidence in your usage forecast and current wholesale prices look attractive vs the historical band.
Brokers vs. Direct REP Sales
Texas energy brokers (sometimes called "consultants" or "advisors") solicit bids from multiple REPs on your behalf. Their compensation comes from a per-kWh commission baked into the REP's rate — usually 0.2 to 0.6 cents per kWh, occasionally higher.
Pros of using a broker: They handle the RFP paperwork; compare 5 to 15 REPs in a single quote process; know which REPs price competitively for your specific usage tier and TDU territory; and handle contract negotiation and red flags.
Cons: Their incentive is to close, not necessarily to find the lowest rate; the commission is invisible in the quote unless you specifically ask for the REP's "raw" rate; some brokers steer to REPs that pay them the highest commission, not the lowest customer rate.
Best practice: Get one broker quote AND one direct quote from a major Texas REP (TXU Energy Business, Direct Energy Business, Constellation, Reliant Business). If the broker rate is within 0.2 cents of direct quotes, the broker is fine and saves you time. If the broker rate is 0.5+ cents higher, the commission is eating your savings — go direct or find a flat-fee broker.
Flat-fee energy consultants exist but are less common at the small-business size. They charge $500 to $3,000 for the RFP process and don't take REP commissions. Worth it for businesses spending $50,000+ per year on electricity.
The Major Texas Commercial REPs
The Texas deregulated commercial market is more concentrated than residential. Most volume flows through TXU Energy Business; Constellation NewEnergy (a subsidiary of Exelon); Direct Energy Business; Reliant Business; Engie Resources; NRG Business (parent of Reliant; sometimes quoted separately for larger accounts); and Calpine Energy Solutions.
Smaller REPs (Hudson Energy, Stream Energy, Champion Energy) often compete on price for specific customer profiles. The right REP depends on your size, your TDU, your industry, and your usage curve.
Demand Charge Management
This is the lever most Texas small businesses don't pull, and it's where the largest unlocked savings live. Three tactics:
Sequence high-draw equipment. Run the dishwasher and the rooftop AC at different 15-minute windows. Your demand reading is the highest 15-minute average — coincident draws define it. A restaurant that runs ice machine cycles concurrent with peak AC pulls higher demand than one that staggers them.
Pre-cool or pre-heat the facility. Bring building temperature to setpoint before peak demand windows. The HVAC can then idle during peak. For Texas businesses, this means pre-cooling the building before 1pm in summer, when commercial peak rates and demand coincidence both spike.
Install a real-time peak monitor. A display at the front-of-house tells staff when to delay non-critical loads. Several vendors (Verdigris, eGauge, Cordia Energy) offer commercial-grade demand monitoring at $300 to $2,000.
A typical Texas small restaurant can shave 5 to 12 kW of peak demand with no equipment changes. At $15 per kW per month — TDU demand charge rates vary by territory — that's $900 to $2,160 per year in pure demand-side savings, independent of REP shopping.
Texas-Specific Commercial Risks
Bill shock from summer demand peaks. Texas commercial demand charges include a 12-month ratchet in some TDU territories — meaning if you set a new peak in July, you pay demand charges based on that peak for the next 12 months even if your demand drops. Avoid setting unnecessary peaks during HVAC startup or holiday lighting installation periods.
ERCOT wholesale volatility. Variable-rate commercial plans expose you to ERCOT prices. During Winter Storm Uri in 2021, several Texas businesses on variable plans received $40,000+ monthly bills. The PUCT has implemented post-Uri reforms but the underlying market design remains volatile. For most small businesses, a fixed-rate plan is the right answer.
Switch holds on past-due balances. Same rule as residential: if you have an unpaid balance with your current REP, you can't switch to a new one until it's cleared. Watch out for this during procurement transitions.
When to Re-Shop
Set a calendar reminder for 90 days before contract end. Commercial procurement takes longer than residential — bid solicitation, contract review, sometimes legal sign-off. Don't wait until month 35 of a 36-month contract.
If your business is growing fast (load up 30%+), re-shop annually. Higher usage tiers often qualify for better rate cards. If your load is declining (lost a major tenant, scaled down operations), re-shop sooner — your old contract may have a usage band that no longer fits.
The Texas Solar Question for Small Business
Commercial rooftop solar in Texas has dramatically different economics than residential. The Federal Investment Tax Credit (30%) plus accelerated depreciation (MACRS) drops effective system cost by 40 to 60%. Buyback rates are typically wholesale-indexed or net-of-billing-cycle, not net metering. Demand reduction from solar generation during summer peak is the biggest savings driver, often more than energy savings.
A 50 kW commercial solar system on a Texas retail store typically pays back in 5 to 9 years with current rates. The math depends heavily on the REP's solar handling — some major commercial REPs don't credit exports at all, others offer wholesale-indexed buyback.
If you're investing in solar, RFP the supply contract specifically for "solar-friendly" terms. A few commercial REPs have built specific products for solar customers (Engie, Constellation, Direct Energy Business).
The Bottom Line for Texas Small Businesses
Three habits separate Texas businesses that procure electricity well from those that don't: calendar-driven re-shopping at 90 days before contract end; demand-side management that reduces peak kW, independent of REP rate; and honest broker relationships or direct REP shopping with multiple quotes.
Done well, a typical Texas small business saves 15 to 30% on annual electricity costs vs. defaulting to the incumbent REP's renewal offer. On a $25,000 annual bill, that's $3,750 to $7,500 per year — every year, every renewal cycle. It compounds.
Treat electricity procurement as a recurring discipline, not a one-time setup. The Texas commercial market rewards attention.