By admin Texas ranked second in the country for electricity disconnection rates in 2024, with about 23% of residential customers cut off from power due to billing and nonpayment issues throughout the year, according to data from the Energy Information Administration. Only Oklahoma had a higher rate.
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But disconnection rates vary widely by what kind of electrical utility families use, a Dallas Morning News analysis of EIA data found. In Texas, investor-owned utilities disconnected about a third of customers due to nonpayment throughout 2024 – triple the rate of municipally owned and cooperative utilities.
About 85% of Texans have the ability to choose a for-profit retail electricity provider because the energy market was deregulated in 2002. The utility responsible for transmission and distribution of their energy depends on where they live.
Some Texans, like those who live in San Antonio and Austin, are required to buy power from a city-owned utility, while others use an electrical cooperative. Both of these types of utilities opted out of the deregulated market, generally managing their own infrastructure.
The difference in disconnection rates between types of utilities may reflect differences in the utility’s business strategies, experts told the News. Investor-owned companies may optimize for profits, disadvantaging lower-income customers, while municipal-owned and co-op utilities’ focus on customers can offer flexibility to a wider base of households, said Margo Weisz, executive director of the Texas Energy Poverty Research Institute.
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Prioritizing profit can disadvantage low-income customers
Investor-owned utilities prioritize making money for shareholders, Weisz said. Electricity transmission and distribution companies including Oncor and CenterPoint fall in this category. They serve the majority of Texas residential customers, though they are not responsible for charging customers directly. Retail service providers that residents pay directly such as TXU or Reliant are also investor-owned and generally issue orders for power to be disconnected for nonpayment.
Lower-income customers in a deregulated market, such as Texas, can be disadvantaged due to lower credit scores or their inability to afford a deposit. They may have limited access to preferential electricity rates or be forced into more expensive plans with investor-owned utilities, contributing to a higher disconnection rate.
“It’s based on profit,” Weisz said. “You can’t squeeze blood out of a turnip.”
Infrastructure expenses by utilities, such as grid expansions, can also drive costs up for consumers.
“A disproportionate amount of the costs of these transmission and distribution upgrades or extensions fall onto the residential customer class,” said UT Dallas Assistant Professor Erin Litzow, who studies environmental, development and energy economics.
Higher costs, combined with households that can’t afford them, can also lead to more disconnections among customers of investor-owned utilities.
Customer-owned utilities turn more to local energy solutions
Municipal-owned and cooperative utilities have what’s effectively customer ownership, through local governments and directly elected governing boards, respectively. Co-ops mostly serve rural areas.
That customer focus can result in rates and infrastructure that lead to less disconnections.
Where lower-income investor-owned utility customers might have disparate access to more cost-effective electricity, municipal and co-op companies tend to offer more uniform plans, Weisz said. While that means on average, co-op and municipal utilities might have rates “a hair higher” than plans in the retail market, it also leads to more room for lower-income customers to avoid disconnection.
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Investor-owned retailers offer payment assistance to some lower-income customers. Local governments including Dallas County and the Texas Department of Housing and Community Affairs help qualifying low-income residents with payment as well.
Still, co-op and municipal utilities often offer more financial support to customers with lower incomes than investor-owned companies, Weisz said.
At CoServ Electric, formerly the Denton County Electric Cooperative, customers can sometimes waive a deposit with a letter of credit from previous providers, said Caitlin Creed, director of marketing and communications at CoServ. There are also prepaid plans available to customers, and unlike other electricity companies that require deposits up front, customers can pay them with their first bill.
“We’re really community focused,” Creed said. “Any way we can help our members, we will always try to do that.”
Unlike investor-owned utilities, municipal and co-op companies can both generate and transmit power over lines they own and also sell that power directly to consumers. Because energy generation infrastructure is expensive to build, it’s less cost-effective for municipal and co-op utilities to focus on maximizing grid expansion – which can be costly for consumers.
Municipal and co-op utilities are often more concerned with energy conservation than investor-owned companies that have the ability to pass along construction costs to a wider consumer base, Weisz said.
Co-ops and municipal utilities tend to invest in what Weisz calls “local solutions” for electricity grid issues. Those include:
* Local battery systems that allow utilities to store energy for use during high demand, high cost hours
* Programs that help customers identify or implement home improvements for energy efficiency
* Demand response plans that incentivize customers to use less energy during periods of high electricity demand
Austin Power, one of the largest municipal-owned utilities in Texas, recorded an average peak load drop of 57 megawatts (MW) during high-use periods due to its demand response program last year, according to a February press release. That means the utility saved enough electricity to power more than 14,000 homes during peak hours.
Investor-owned utilities also offer opportunities for conservation programs. About 1 million customers have used Oncor’s energy efficiency programs in the last 24 years, according to Oncor spokesperson Kerri Dunn. EIA data shows the company had an average of 3.5 million residential customers per month in 2024. Some retailers also partner with Oncor for demand response programs, Dunn wrote in an email to The News.
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