Texas governor-elect's plan to freeze electricity prices raises questions over legal authority

On her first day in office, Texas Democratic Gov.-elect Gina Hinojosa plans to freeze residential electricity rates in response to what she described as an affordability crisis.

"On Day One as governor, I’ll freeze residential electricity rates and make corporations finally pay their fair share," Hinojosa said in an interview with a local energy data group. She reiterated the plan in an interview with the Texas Tribune, stating, "Within an hour of taking the oath of office, I will declare a high-cost emergency in the state of Texas and issue an emergency executive order to … freeze electricity rates."  

The plan is raising concerns that such a freeze will clash with Texas’ uniquely competitive energy sector, which relies heavily on free-market choice, and that it could inadvertently create energy shortages as suppliers are prevented from adjusting their prices.

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That’s the concern of Nick Loris, the president of C3 Solutions, a conservative coalition for climate solutions that focuses on energy, environment and agriculture policy.

He expects the emergency declaration will face legal challenges almost immediately from energy providers. In particular, he cast doubt on the scope of the emergency declaration.

"The Texas Disaster Act lets the governor declare disasters and suspend the regulatory laws and statutes that are in existence. But I think there is a high degree of skepticism, both from courts but also from state policymakers, that this warrants such a claim — and that it is such a disaster," Loris told Fox News Digital.

"I would imagine if there were legal challenges, it would come from those affected parties," he added.

Loris explained that Texas has fostered one of the most competitive energy environments in the country.

In 1999, the state passed Senate Bill 7 — a piece of legislation that opened most of the state to retail choice, allowing customer to pick their preferred retail electric providers (REPs), beginning in 2002.

"The legislature finds that the production and sale of electricity is not a monopoly warranting regulation of rates, operations, and services and that the public interest in competitive electric markets requires that, except for transmission and distribution services and for the recovery of stranded costs, electric services and their prices should be determined by customer choices and the normal forces of competition," the Texas Legislature wrote in the law.

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As a result of the law, Texas largely operates its own independent energy grid and runs an energy-only wholesale market in which generators are paid primarily for the electricity they produce rather than for standing capacity.

Texas has over 100 REPs that energy consumers can pick from, each competing for consumers' business.

To Loris, the range of choices provides a remarkable amount of flexibility for consumers.

"It's like shopping at a grocery store for cereal for your retail electricity. There's so much choice that you can enter into. Short-term contracts, long-term contracts, use different fuel sources," Loris said.

However, he warned that a utilitiesrfreeze undermines that competitive environment, causing providers to shoulder the burden of fluctuating supply.

"If the electricity suppliers are not covering the costs that they incur, that's going to leave them worse off and make it more vulnerable for them to adequately provide that power," Loris said.

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"Price signals really kind of act like a traffic light. They tell people when to speed up, when to slow down, or when to come to a full stop," he added.

Having won her Nov. 3 gubernatorial race, Hinojosa will be sworn in on Jan. 19, 2027.

Her office did not immediately respond to requests for comment on what her response would be if the rate freezes resulted in an energy shortage.