This paper analyzes the determination of residential electricity prices in the competitive Electric Reliability Council of Texas (ERCOT) market. This analysis suggests that electricity restructuring in Texas has not yet resulted in lower prices for the majority of residential energy consumers in areas open to competition. Contrary to common expectations, residential electricity costs for consumers at a typical (1000 kWh per month) consumption level have increased at a greater rate in the areas of Texas offering retail choice than in the areas of the State where retail competition has not been introduced. (c) 2005 Elsevier Ltd. All rights reserved.