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

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

In an interview with a local energy data group, Hinojosa said: 'On Day One as governor, I'll freeze residential electricity rates and make corporations finally pay their fair share.'

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.'

But 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.

Nick Loris, the president of C3 Solutions, a conservative coalition for climate solutions, expects the emergency declaration will face legal challenges almost immediately from energy providers.

Loris told Fox News Digital: '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.'

He added: 'I would imagine if there were legal challenges, it would come from those affected parties.'

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 customers to pick their preferred retail electric providers, beginning in 2002.

In the law, the Texas Legislature wrote: '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.'

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 retail electric providers that energy consumers can pick from.

To Loris, the range of choices provides a remarkable amount of flexibility for consumers. He said: '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.'

However, he warned that a utilities freeze undermines that competitive environment, causing providers to shoulder the burden of fluctuating supply. He said: '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.'

He added: '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.'

Having won her November 3 gubernatorial race, Hinojosa will be sworn in on January 19, 2027. She made history as the first Latina governor of Texas.

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