Gov. Greg Abbott is proposing legislation that would break up the municipal utility monopolies in Austin and San Antonio, allowing residents to choose their own utility provider.
The proposal would open the two cities’ electricity markets to competition and prohibit municipal utilities from using utility revenue to fund their city governments.
Abbott’s office estimates the changes could lower electricity costs by 10 percent for the average Austin ratepayer and 13 percent for the average San Antonio ratepayer.
“We must address the cost of electricity that is putting a growing strain on Texas households,” said Abbott. “That’s why I’m proposing legislation to end the monopoly control that cities like Austin and San Antonio have over electricity services and give Texans the freedom to choose the provider that works best for them.”
Austin and San Antonio residents are among the roughly five million Texans who receive electricity from municipally owned utilities. Unlike investor-owned utilities, which are regulated by the Public Utility Commission of Texas, municipal utilities are run and overseen by their respective city governments.
Municipal utilities operate as vertical monopolies, controlling multiple stages of electricity service including generation, transmission, distribution, and the sale of power directly to residents.
CPS Energy, San Antonio’s municipally owned utility, pushed back on Abbott’s proposal, saying it “consistently maintains the lowest combined electric and gas residential rates in Texas and high reliability, including compared to investor-owned utilities.”
Abbott also plans to prevent cities from using utility revenue to help fund their budgets.
About 30 percent of San Antonio’s general funding and 10 percent of Austin’s revenue come from their municipal utilities.
“This is taxation through electricity prices without representation, and it must come to an end,” Abbott said.
He also pointed to the more than 100,000 people who live outside the city of San Antonio yet still have to pay the city for services they don’t use.
Texas lawmakers have scrutinized municipal utility general fund transfers as a hidden tax, since ratepayers have no direct vote on the transfer rate the way they would with a property tax election. A 2023 bill that did not pass would have implemented restrictions on using utilities to fund the city budget and a May 2026 Senate interim hearing revived the debate, focusing on water utility transfers.
“It’s time that we get it across the finish line,” Abbott said.
The effort is part of Abbott’s Keep Texas Affordable agenda, which includes efforts to lower property taxes, tuition, housing and insurance costs.
