Texas Bad Credit Electricity: Comparing No-Deposit Plan Costs Without Getting Burned
If your credit score is rough, starting or switching electricity service in Texas often feels like a cash-flow trap: either hand over a refundable deposit that can run into hundreds of dollars, or take a "no deposit" prepaid plan that may cost more per kilowatt-hour once you are using power every day. The choice is real, and it is regulated—but the marketing is not always clear. This guide walks through how deposits work under Texas rules, what prepaid actually costs to start and to run, and how to compare offers so you are judging total cost, not just the sticker rate.
Why deposits show up when credit is shaky
In competitive (deregulated) parts of Texas, you pick a Retail Electric Provider (REP)—the company that sells you power—while a separate wires company delivers it. Your REP can ask you to prove "satisfactory credit" before it turns service on. If you cannot, the REP may require a cash deposit before you receive power, under the Public Utility Commission of Texas (PUCT) customer-protection rules in ¹.
Satisfactory credit is not a mystery score invented by one company. For many applicants, it can include recent electric payment history (service within the prior two years, not delinquent, and no more than one late payment in the last 12 months of that service), a satisfactory consumer-report rating, age 65 or older with no current electric delinquency, documentation as a survivor of family violence, or—on affiliated REP or provider-of-last-resort paths—medical-indigence criteria, as spelled out in ¹. Competitive REPs other than an affiliated REP or POLR must at least honor the age-65 and family-violence paths, and they must tell you about those options when they ask for a deposit (¹).
Deposits are common on traditional postpaid plans—the ones that send a monthly bill after you use electricity—because the company is extending you credit for a month of usage. Comparison sites that explain deposit mechanics note that amounts often track credit history and estimated monthly use, and that prepaid or pay-as-you-go products are the usual way around a large security deposit (²).
None of this means "bad credit, no power." It means the market routes you toward either posting cash security or prepaying so the provider is not exposed to unpaid postpaid bills. Small-business applicants sit under a different subsection: REPs may set nondiscriminatory commercial credit criteria, and if those are not met, a deposit may still be required—though governmental entities are carved out (¹).
How Texas caps deposits—and when you can get one back
Texas does not let REPs invent unlimited deposits. For residential customers, the total of all deposits (initial plus any later "additional" deposit) cannot exceed the greater of one-fifth of estimated annual billing or the sum of estimated billings for the next two months (¹). Put simply: if your estimated bills run about $150 a month, two months is $300 and one-fifth of a $1,800 year is $360—so the rule's "greater of" math can put the ceiling around $360 in that example. Higher usage, bigger ceiling. After a year on a REP, you can ask the company to recalculate the required deposit using your actual history (¹).
That deposit is not free money for the company. A REP that holds a deposit must pay interest at least at the annual rate the commission sets under Texas Utilities Code §183.003, and if the deposit is held more than 30 days, interest accrues from the deposit date (¹). After you pay 12 consecutive residential bills on time with no late payments, the deposit must be refunded (often as a bill credit) (¹).
An affiliated REP or POLR must also offer a written letter of guarantee instead of cash when an initial deposit is required (¹). Existing customers generally cannot be hit with a new initial deposit unless they were late more than once in the last 12 months or were disconnected for nonpayment (¹). Additional deposits on existing accounts have their own triggers, including a sharp rise in average billings plus a recent disconnection notice (¹).
So if someone quotes a $500 or $800 "required deposit" for ordinary residential service, ask them to show how that fits the §25.478(e) cap for your estimated usage—and ask whether you qualify for a credit path that avoids the deposit entirely.
Prepaid and other no-deposit paths: what they actually are
Prepaid (pay-as-you-go) service flips the cash-flow: you buy electricity before you use it. The PUCT's consumer FAQ is blunt: prepaid does not require a deposit; instead, the REP requires a connection balance of up to $75 to start, and you may also owe Transmission and Distribution Utility (TDU) fees that can push the total due before start above that $75 (³). You will not get a traditional monthly bill; you get electronic or phone notices about remaining balance, and you can request a Summary of Usage and Payment covering up to twelve months (³).
Power to Choose—the official PUCT shopping site—defines prepaid as advance-payment service on a pay-as-you-go basis, with usage tracked daily via a smart meter or similar device (⁴). The site's shopping tools explicitly let you filter for prepaid plans (⁵). Marketplace explainers aimed at shoppers likewise describe no-deposit or prepaid options as the path when you do not meet credit thresholds for a standard deposit (⁶).
Marketing has long led with "no deposit, no credit check, no contract." A ⁷ quoted prepaid advertising that used exactly that pitch—and documented why consumer advocates still worry about fees, sudden shutoffs, and weaker practical access to assistance. The same reporting noted that traditional postpaid disconnections generally required longer advance notice than prepaid's near-real-time low-balance shutoffs (⁷).
Prepaid is not the only "start without a big deposit" path. If you meet a satisfactory-credit criterion in ¹—especially age 65+, documented family-violence status, or a clean recent payment history that a REP accepts—you may qualify for ordinary postpaid service with no cash deposit. That can be cheaper over a year than a high prepaid rate, even if the enrollment process asks more paperwork.
Comparing true costs: deposit vs. connection balance vs. running rate
Start with a reality check on what Texas power costs in general. The U.S. Energy Information Administration's Electric Power Monthly showed Texas residential customers paying about 16.99 cents per kilowatt-hour in April 2026 and 15.52 cents in April 2025 (⁸). For calendar year 2024, EIA's Electric Power Annual reported a Texas residential average of 14.94 cents per kWh (⁹). Your plan will sit above or below those statewide averages depending on product type, fees, and how much you use.
Now compare the two common "bad credit" cash asks:
Postpaid with deposit. Upfront cash can be hundreds of dollars, but it is capped, earns interest, and is refundable after a year of on-time bills under ¹. Your ongoing cost is the plan's average price at your usage level on the Electricity Facts Label (EFL), plus whatever base charges and fees the Terms of Service disclose.
Prepaid with connection balance. Upfront cash is usually much smaller—PUCT says the connection balance is up to $75, before any TDU move-in or related fees (³). That money is working capital for your account, not a classic refundable security deposit. Your ongoing cost is whatever the REP charges per kWh as you burn through the balance. The PUCT notes that most prepaid products are variable-rate, so the price per kWh can change as you use power—similar to how gasoline pump prices move (³).
A simple side-by-side for a household using about 1,000 kWh a month—near the national average cited by the ¹⁰—shows why the rate matters more than the signup headline. Suppose a postpaid fixed plan's EFL average at 1,000 kWh is close to the recent statewide ballpark around the mid-teens of cents per kWh from EIA data above; energy alone lands near $140–$170 before separate fees. A two-month-style deposit might be a few hundred dollars sitting with the REP, later returned with interest if you pay on time. If a prepaid product's effective price after fees runs several cents per kWh higher than that postpaid EFL average—as consumer reporting has long said prepaid plans tend to do (¹¹)—the same 1,000 kWh costs more every month. Over twelve months, even a 3¢/kWh effective premium is about $360 of extra energy spend at 1,000 kWh monthly; a 5¢ premium is about $600. That can erase the "savings" of skipping a refundable deposit.
That premium pattern is not just online chatter. The ¹¹ has warned that prepaid plans tend to carry higher per-kWh rates and assorted fees, and that they operate under different consumer-protection timing than typical postpaid plans. The Tribune's coverage similarly framed prepaid as attractive for people who cannot clear a deposit—and risky if balances hit zero (⁷).
Also remember wires charges. In Oncor territory, for example, Oncor explains that it does not bill you directly; your REP passes through delivery charges that include a fixed monthly amount and a per-kWh delivery component (¹²; ¹³). Those TDU costs show up whether you are prepaid or postpaid. When you start service, PUCT warns that TDU fees can make the prepaid "due before start" total higher than the $75 connection balance alone (³).
Rule of thumb: treat a deposit as locked savings you should get back if you pay well; treat a prepaid rate premium as money you will never get back. If you can scrape together the deposit (or qualify for a waiver path), run the 12-month math before you default to prepaid.
How to shop: Power to Choose, EFLs, and fee traps
¹⁴ is the official, unbiased PUCT site where providers can list offers for free so you can compare plans. Enter your ZIP code, narrow by prepaid if that is what you need, then open each plan's fact sheet before you click through to enroll (⁵). The PUCT requires an Electricity Facts Label for every plan so you can make an apples-to-apples comparison of rates, fees, and contract terms (⁴). For prepaid products, also read the Prepaid Disclosure Statement (PDS); the PUCT says both the PDS and EFL are available on Power to Choose and on the REP's site (³).
Federal consumer-protection thinking on retail electric competition has long stressed the same point: customers need standardized cents-per-kWh disclosures at common usage levels such as 500, 1,000, and 2,000 kWh so offers are comparable (¹⁵). Texas EFLs are that disclosure tool in practice.
Watch for minimum-usage fees and other fine print. Power to Choose's FAQ explains that many plans charge a fee if you use less than a set kWh amount—often thresholds like 500 or 1,000 kWh—and that the charge may not be obvious on the bill, so you must check the EFL (¹⁶). Low-usage apartments on "cheap" headline rates can lose the savings to those fees. Prepaid shoppers should also scan the PDS for payment processing fees, reconnect fees, and how often the variable rate can move (³).
Not every Texan has retail choice. Power to Choose notes that the 1999 deregulation law opened choice in most of the state, but customers of many municipals and cooperatives may not shop REPs the same way (¹⁶). Oncor lists four TDSPs in the competitive zones—Oncor, CenterPoint Energy Houston Electric, Texas-New Mexico Power, and AEP Texas—and reminds customers that the wires company stays the same when you switch REPs (¹²). If you are moving in, Oncor's process is: find your ESI ID, choose a REP (or call Texas Electric Choice at 1-866-797-4839), then have the REP send the move-in order (¹⁷). The Chronicle has likewise pointed shoppers to Power to Choose as the state-sanctioned clearinghouse and noted you can call 866-797-4839 if you lack internet access (¹¹).
Risks, rights, and assistance caveats on prepaid
The trade for skipping a deposit is operational risk. Under prepaid rules, a REP may set a disconnection balance of up to $10 for residential customers; if your current balance falls below that level, disconnection can follow with little notice (³; ¹⁸). The FAQ says you should get notice one to seven days before the balance is expected to hit the disconnection threshold—but if usage burns the balance faster than expected, shutoff can come as soon as one day after the low-balance notice (³). That is a different rhythm than classic postpaid disconnection timelines advocates and reporters have contrasted for years (⁷; ¹¹).
If you are disconnected with a negative balance, you must clear that balance, then fund a new connection balance; service should resume within two hours after the reasons for disconnection are corrected (³). Deferred payment plans still exist in defined situations—such as a negative balance of $50 or more during an extreme weather event, certain declared disasters, or underbilling of $50 or more—but entering a deferred plan can trigger a switch-hold that blocks changing REPs until it is paid (³).
Assistance is a hard stop for some households. The PUCT warns that some assistance agencies may not provide bill-payment help to prepaid customers, and that if you have used energy assistance before—or expect to need it—you should confirm eligibility before you enroll in prepaid (³). That single phone call can be worth more than any rate comparison. The Tribune's advocacy coverage raised the same assistance-access concern when prepaid marketing surged (⁷).
Keep contact info current. Prepaid REPs must send time-sensitive notices—balance alerts, disconnection warnings, payment confirmations—by phone or electronic means, and they need a valid number or email to do that well (³).
Outside Texas choice markets—and what still applies everywhere
Deregulated shopping is not unique to Texas. Comparison platforms note competitive retail markets also exist in places such as Ohio and Maryland, with prepaid-style products positioned similarly for customers who want to avoid deposits and credit screens (¹⁹). Rules, deposit caps, and disclosure forms differ by state commission, so do not assume Texas §25.478 math travels with you.
In regulated monopoly territories—many munis, co-ops, and fully regulated investor-owned utilities—you generally cannot pick a REP. Credit and deposit policies still exist, but they come from that utility's tariff and state rules, not from Power to Choose plan shopping. The shopping discipline still helps: know your kWh use, ask for the deposit amount in writing, ask when it is refunded, and ask whether a prepaid or budget-billing option exists.
Wherever you live, cutting usage lowers both deposits (when they are based on estimated bills) and prepaid burn rates. Energy Saver guidance starts with reading your bill, notes national average use near 1,000 kWh per month, and walks through cutting always-on loads and shifting flexible use if time-based rates are available (¹⁰).
A practical decision checklist
- Confirm you are in a choice area. Use ¹⁴ or call 1-866-797-4839. If you are not, talk to your muni or co-op about deposit alternatives—not prepaid REP ads from another city.
- Pull last 12 months of kWh (or estimate carefully if you are moving). Compare EFL prices at 500 / 1,000 / 2,000 kWh the way disclosure best practice recommends (¹⁵).
- Ask every postpaid REP two credit questions: What deposit would you charge at my usage, and which ¹ credit paths can waive it? Get the deposit amount against the one-fifth / two-month cap.
- If you need prepaid, filter for it on Power to Choose, then read the EFL and PDS side by side (⁵; ³). Write down connection balance, TDU fees due at start, disconnection balance, variable-rate language, and every named fee.
- Run a 12-month total. Deposit path: deposit (refundable) + expected postpaid energy cost. Prepaid path: connection balance + expected prepaid energy cost at a realistic average cents/kWh from the EFL/PDS. Include the fee gotchas Power to Choose flags for low users (¹⁶).
- Call assistance programs before you enroll in prepaid if you have ever needed help paying an energy bill (³).
- After you start, pay like your lights depend on it—because on prepaid, they do. On postpaid with a deposit, twelve clean bills are how you get that cash back with interest (¹).
Bad credit does not lock you out of Texas electricity. It does force a sharper cost comparison. The deposit is often the expensive-looking option that is cheaper over a year; the no-deposit prepaid plan is often the cheap-looking option that is more expensive if the rate and fees run hot. Read the EFL, do the math at your real usage, and pick the path that fits both your credit situation and your cash flow—not just the headline that says "no deposit."