Residential electricity pricing in Texas's competitive retail market

Using a large sample of residential retail electricity plans advertised on the Public Utility Commission of Texas's Power-to-Choose website between January 2014 to December 2018, we analyse how a retail price quote varies with its per MWh procurement cost forecast based on wholesale prices and other product attributes. Our panel regression analysis finds that a retail price quote partially passes through 43% to 47% of a wholesale price forecast changes and embodies a risk premium that increases with wholesale price forecast volatility. Prepayment and time-of-use plans contain price premia. The price premia associated with higher-than-average renewable energy contents in the early years of our sample have largely vanished by 2018. Longer contract terms come at a higher price. Finally, increased one-month lagged customer switching tends to be associated with reduced retail price quotes. •We explain variations in retail electric energy prices in Texas' competitive retail market.•Changes in the projected wholesale price are not fully reflected as changes in retail plans' price quotes.•Rates of wholesale price pass-through rates range from 43% to 47%.•The price premia associated with higher-than-average renewable energy contents have largely vanished by 2018.•Increased customer switching tends to reduce retail price quotes