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. Copyright © 2020 Elsevier B.V.