Texas cities oppose Abbott plan to break up local electric utility systems

Texas cities face a utility fight

Austin and San Antonio could lose millions yearly if lawmakers disband their city-owned electric utilities. Greg Abbott says customers should benefit. Officials warn the change could cost customers. The dispute is about electricity prices and revenue.

Supporters want private competition in markets now controlled locally. They say competition could lower bills for families and businesses. City leaders say their utilities offer affordable power. They also use utility revenue to support services.

Why utility revenue matters

City-owned utilities do more than deliver electricity to homes and businesses. They can send earnings to the cities that own them. Austin Energy transferred about $125 million to Austin in 2025. CPS Energy budgeted $559.7 million for San Antonio in fiscal 2027.

That money helps cities pay for services residents use. Examples include libraries, parks, and first responders. Losing those payments could deepen budget problems. Both cities face financial pressures.

Abbott says bills should come down

Abbott’s campaign describes city-owned utilities as monopolies and wants to introduce private retail competition for customers. Abbott says Austin and San Antonio residents could save more than 10% on their electricity bills, with small businesses potentially seeing greater savings.

Texas electricity prices have risen substantially. U.S. Energy Information Administration data show the state’s average residential rate was 11.71 cents per kilowatt-hour in 2020, compared with a year-to-date average of 16.11 cents through June 2026. That is an increase of about 38%, keeping affordability at the center of the debate.

Cities warn of steep transition costs

Austin officials say changing the utility system would be difficult. Mayor Kirk Watson said deregulation could cost more than $1 billion. He called it a multi-year process. Customers would pay those costs, according to the city.

Austin Energy says its structure supports affordability and reliability. The utility is a nonprofit company. Its earnings can return to the community through city payments. Officials argue replacing it could create costs for customers.

Texas has dozens of public utilities

Texas has 72 municipally owned utilities serving about 5.1 million people. They provide electricity to roughly 15% of the state’s population. These utilities own poles, wires, and meters. They also buy and sell power within their service areas.

Public utilities have a local monopoly on electricity sales. However, they are owned and overseen by governments. Local officials help set electric rates and monitor them. The model differs from private utilities.

Fun fact: Texas has its own independent power grid operated primarily through ERCOT, which serves about 90% of the state’s electric load.

San Antonio defends its public model

CPS Energy says its nonprofit structure keeps its focus on San Antonio residents. The utility does not answer to private shareholders seeking profits. Its revenue supports programs and the regional economy. Officials say that connection strengthens services.

CPS also points to energy resiliency and assistance. It says the utility supports jobs and small businesses. The company warns changing the model could affect customers. It says public power supports Texas’s economy.

City budgets are already under pressure

Austin officials had projected a structural budget gap that could exceed $100 million early in the next decade before adopting changes intended to reduce that pressure. Losing Austin Energy revenue could create a new challenge for future city budgets.

San Antonio began its FY2027 budget process with a projected General Fund shortfall of nearly $158 million through FY2028. Its proposed budget now closes that gap through spending reductions and revenue changes. Across Texas, inflation, state limits on property-tax revenue growth, a slower economy, and the end of pandemic-era federal funding have put pressure on major city budgets.

Public power can cost less

A 2024 study by the American Public Power Association found a counterpoint. Public utility customers paid 14% less on average than customers of other utility types. That challenges the idea that competition means lower bills. Results do not guarantee that outcome.

Energy costs depend on factors beyond ownership. Local generation, transmission limits, and demand can affect prices. That makes Abbott’s proposal difficult to predict. Experts say lower bills are not guaranteed.

Houston offers a different model

Houston does not have a municipally owned electric utility. Instead, customers can shop among retail electricity providers. Separate companies maintain wires, poles, substations, and meters. This differs from Austin and San Antonio today.

Yet Houston customers can face high electricity costs. The Houston region has some of the highest rates on the ERCOT grid. Consultants point to heavy demand and limited local generation. Transmission congestion can also push prices higher.

Texas opened much of its market in 2002

Texas opened most of its ERCOT retail electricity market to competition in 2002. The 1999 restructuring law allowed municipally owned utilities and electric cooperatives to opt into customer choice or remain outside the competitive retail system. Austin and San Antonio chose to remain municipally controlled.

Texas lawmakers revisited the issue in 2023. Rep. Ellen Troxclair filed legislation that would have required certain municipal utilities to offer retail electric choice after a major Central Texas ice storm. The

Fun fact: Texas has more installed wind power capacity than any other U.S. state, according to the U.S. Energy Information Administration

An ice storm fueled the debate

A February 2023 storm left hundreds of thousands of Central Texans without power. Some communities outside Austin were especially frustrated with outages. Bee Cave and Lakeway receive Austin Energy service but lack Austin City Council representation. The storm raised serious accountability questions.

Troxclair argued some customers had limited influence. She criticized the lack of competitors. Her legislation sought to give customers a chance to shop rates. The bill stalled in committee.

Critics question the promised savings

Supporters of Abbott’s plan say competition can put customers first. Critics say deregulation would not fix Texas’s electricity cost problem. Sierra Club representative Cyrus Reed opposes removing local utility control. He says prices have risen across both markets.

Reed favors energy efficiency and bill assistance programs. He says efficiency can help reduce congestion and demand. Those steps could ease pressure on the grid. There is no simple answer for everyone.

Curious how utility costs can affect customers elsewhere? Find out what happened with power charges in Kansas.

The Legislature will decide next steps

Abbott’s proposal sets up a debate for Texas lawmakers. The decision could affect electricity bills and city budgets. It could also change how Austin and San Antonio manage power service. The outcome will depend on legislation.

For residents, the debate could have lasting effects. City leaders may need new ways to replace lost utility revenue. Customers could also face costs tied to changing the system. The proposal could reshape Texas electricity service for years.

Want another look at Abbott’s energy agenda? Discover how Texas data centers became part of the debate.

What do you think should matter most when Texas lawmakers decide the future of city-owned utilities?

This slideshow was made with AI assistance and human editing.

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