Is Breaking Up Texas Muni Electric Utilities a Good Idea?
Will Texas Muni Electric Utilities Break Up?
Texans like doing things their own way, and that includes electricity. Most Texans can choose among competing light companies. However, more than 5 million people in Austin and San Antonio get power from city-owned utilities. Gov. Greg Abbott now wants to change that. He says opening these muni electric utilities to competition could lower bills and give customers the power to choose.
Abbott says Austin and San Antonio customers could save up to 13% if they could shop for their power. He also says commercial users could save nearly 22%. He has not provided much detail on how he reached those figures. But, power retailers say the plan could have the opposite effect.
What Does Abbott Want To Change?
Abbott wants state lawmakers to let customers in cities with muni utilities choose their power provider. His plan would also limit city utilities from using utility revenue for costs that are not tied to power service.
That last point matters because city-owned utilities can send some of their earnings to the city. CPS Energy, for example, sends part of its revenue to San Antonio's general fund. This year, that payment is expected to total about $504 million. This would make up nearly 30% of the city's general fund. That’s quite a budget shift!
Abbott says utility customers should not have to pay for city programs through their power bills. But the muni utilities argue that these payments are part of the value they provide to their cities.
What Do Muni Electric Utilities Say?
Both Austin Energy and CPS Energy oppose the plan. They say their customers already get low rates and reliable service without retail competition. CPS says it has some of the lowest combined electric and gas rates in Texas. Austin Energy says it has some of the lowest home electric bills in the state.
The two munis also warn that breaking up their model could raise their costs. They argue that private providers would need to make a profit and take money out of their cities. The munis say they can put more of their earnings back into their system or their city.
What Can Lubbock Tell Us?
Lubbock offers a useful test case. That's because Lubbock Power & Light became the first Texas muni to enter the competitive retail market in 2024. Customers can now choose their provider and plan. That gives Lubbock residents more choice, but it does not prove that competition has lowered bills.
Lubbock does show that a Texas muni can move to retail competition. However, it does not tell us what would happen in much larger cities like Austin and San Antonio.
What Happens Next?
Abbott is likely to push his proposal during the 2027 legislative session. For now, muni electric customers still cannot shop for their own Texas power. If that changes, millions of Texans could have a new choice in how they buy electricity. If you live in a deregulated area, compare plans and rates at https://www.texaselectricityratings.com/electricity-rates.
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