Texas HB 46 Expanded TCUP: 12 New Dispensing Organization Licenses and Building an ERCOT Energy Plan

What HB 46 changed for TCUP operators

Texas House Bill 46, signed June 20, 2025 and effective September 1, 2025, expanded the Compassionate Use Program (TCUP) beyond three vertically integrated dispensing organizations [cbt-hb46] [dps-tcup]. The law replaced the old 1 percent THC-by-weight cap with product-based limits (10 mg THC per serving, one gram per package), added qualifying conditions including chronic pain and terminal illness, allowed additional product forms, and increased the number of dispensing organization licenses from three to fifteen [dps-tcup].

The Department of Public Safety issued conditional licenses in two phases: nine organizations in December 2025 and three more in April 2026, with names published on DPS bulletins [dps-tcup-phase-2]. Conditional status means no cultivation, processing, or retail until final inspection and approval. Each approved organization runs cultivation, processing, and dispensing under one license, so every new entrant is building indoor or greenhouse production from scratch or expanding an acquired site.

For energy procurement, greenfield TCUP facilities share the same ERCOT market rules as data centers and warehouses. There is no cannabis-specific tariff. Your plan must cover TDU service extension, REP selection, and peak management before the first harvest cycle.

ERCOT retail structure: no default, all choice

Roughly 85 percent of Texas electricity consumers buy power through certified retail electric providers in competitive areas [ercot-retail-market]. Municipally owned utilities such as Austin Energy and San Antonio's CPS Energy opted out; most new TCUP builds in the Dallas-Fort Worth, Houston, and Central Texas corridors sit on investor-owned TDUs (Oncor, CenterPoint, AEP Texas, TNMP) where REP choice is mandatory [puc-texas-choice].

That means three decisions before energization:

Decision	Who controls it	Grow-specific note
TDU service size and line extension	Oncor/CenterPoint/AEP	Size for peak kW, not average kWh
REP contract (term, index vs fixed)	You	Pass-through TDU charges common
Load schedule	You	Drives 4CP and demand ratchets

Texas' June 2026 average commercial rate was 8.66 cents/kWh at the meter [eia-epm-5-6-a], among the lowest headline state averages. Cultivation facilities rarely pay the average because low load factor and TDU demand charges inflate the effective rate.

Building the delivery side first

Contact the TDU early with a one-line diagram and phased load schedule. Oncor's tariff separates secondary service at or below 10 kW (energy-only) from greater-than-10 kW classes that bill distribution demand on the higher of current-month peak or 80 percent of the prior eleven-month peak [oncor-tariff]. Crossing 10 kW once can lock you into demand billing for a year even if you later reduce load.

Transmission service for larger primary-voltage customers uses four coincident peak (4CP) billing: ERCOT identifies four system peak intervals June through September, averages your demand in those intervals, and sets your transmission charge for the next calendar year [oncor-tariff]. REPs frequently pass 4CP charges through on commercial contracts even when distribution is bundled.

For a new indoor flower room, assume lighting plus HVAC can push 200 to 400 kW per 10,000 sq ft depending on technology. If that load runs during an ERCOT system peak afternoon, you carry the tag into the next year.

REP contracting strategies for new builds

Without a price to compare, you benchmark REP offers against:

• Fixed all-in (energy plus stated TDU pass-through treatment)
• Index tied to ERCOT real-time or day-ahead
• Block-and-index (fixed block for baseload, index for variance)

New facilities with uncertain ramp-up often start with a shorter fixed term (12 months) or a block-and-index deal until twelve months of interval data exist. See fixed vs index contracts.

Ask each REP explicitly:

1. How are TDU 4CP charges passed through?
2. Is there a material change in usage clause if canopy expands in year two?
3. Can start date align with TDU energization without penalty?

Some REPs hesitate with cannabis-related businesses; others treat TCUP licensees as standard commercial load. You may need to disclose DPS license number during credit review.

4CP-aware scheduling for cultivation loads

June through September is ERCOT 4CP season. System peaks often land on weekday afternoons when commercial air conditioning stacks with industrial load. Flower rooms on 12/12 photoperiod sometimes flip lights-on into the 3 p.m. to 6 p.m. window by accident when staff pick convenient clock times.

Tactics that reduce 4CP exposure without changing biology:

• Offset each flower room by 30 to 60 minutes so contactor closures do not align
• Pre-cool rooms before lights-on so compressors do not spike with HID or LED load
• Monitor ERCOT demand dashboards during heat waves; some operators trim nonessential load when system demand exceeds prior peaks

Detailed mechanics are in our ERCOT 4CP season article. Pair scheduling with demand charge management on the TDU side.

Worked example: 5,000 sq ft vertical rack facility on Oncor

Assume 5,000 sq ft flowering canopy, LED at 35 W/sq ft, three rooms staggered:

• Per-room lighting: ~58 kW
• Coincident peak with HVAC: ~75 kW facility if staggered; ~175 kW if simultaneous

Delivery on Oncor secondary greater than 10 kW includes a distribution demand charge per kW plus energy [oncor-tariff]. Assume $4 to $8 per kW-month distribution demand (verify current tariff section 6.1.1.1 before budgeting).

Monthly energy (rough): 175 kW average lighting duty cycle with stagger ≈ 75 kW peak × 12 h/day × 30 days at 50 percent utilization factor ≈ 135,000 kWh (wide range; model your own schedule).

At 8.66 cents/kWh energy-only average [eia-epm-5-6-a], energy might be $11,700/month before demand and 4CP pass-through. Effective rate often lands 14 to 20 cents/kWh all-in for indoor agriculture.

Checklist before DPS final approval

• TDU service agreement signed with expected demand and voltage
• REP contract start date matches energization
• EMS or contactor schedule documented for 4CP season
• Submeter plan for rooms if you may expand canopy under HB 46 satellite rules
• Backup generation interconnection study if you need harvest protection (optional, costly)

Conditional license holders and phased energization

DPS conditional licensees from December 2025 and April 2026 phases cannot sell until final approval [dps-tcup-phase-2]. Construction power may use temporary service at different tariff. Model permanent service REP contract start at final inspection, not groundbreaking.

Satellite dispensary load

HB 46 allows satellite storefronts [cbt-hb46]. Retail load is smaller than cultivation but adds meters. MSOs should decide per-meter REP vs aggregated procurement with legal review of account structure [puc-texas-choice].

Hemp vs TCUP utility treatment

Hemp-derived THC retail remains legal for adults separate from TCUP [state data note]. Hemp processors and TCUP cultivators share ERCOT rules but different regulators. Utility does not distinguish; your REP might ask business description for credit.

Oncor rate case and TCRF

Oncor base rate orders and Transmission Cost Recovery Factor updates change delivery pass-through [oncor-tariff]. REP fixed energy does not freeze TDU charges. Review Oncor tariff section 6 each January.

Solar and backup generation

On-site solar rarely covers full indoor load but may shave 4CP if sized with export limits [ercot-4cp article]. Backup generators for harvest protection require interconnection study; budget separately from REP contract.

REP comparison table for new TCUP builds

Term	Pros	Cons
12 mo fixed	Flex after year one	Renewal risk
24 mo fixed	Budget certainty	Footprint lock-in
Index	Low headline rate	Heat wave exposure

DPS inspection and energization sequence

1. Permanent power available
2. Building inspection
3. DPS final approval to cultivate [dps-tcup]
4. Harvest schedule

Align REP start with step 1 completion, not step 4.

HB 46 expanded the market, but ERCOT power economics punish coincident peaks. Treat energy as a commissioning task equal to HVAC validation, not a bill you fix after opening.

Construction power versus permanent TCUP service

Conditional licensees often energize construction trailers and temporary grow rooms before DPS grants final approval to cultivate [dps-tcup-phase-2]. Temporary service may sit on a different tariff class than permanent production load. Oncor secondary service at or below 10 kW bills energy only; crossing that threshold once can lock demand billing for twelve months even if average load later drops [oncor-tariff].

Phase	Typical voltage	Contract owner	4CP exposure
Construction trailer	120/240 V, under 10 kW	General contractor account	Usually none
Veg room commissioning	480 V, 100+ kW	License holder SAID	High if June-Sept
Full flower production	Same SAID	License holder REP	Full TDU ratchet

Ask the TDU whether commissioning load will roll into the permanent service agreement or require a new SAID. REPs price credit risk on the license holder's financials; a general contractor's temporary account does not transfer REP pricing to the operator automatically [ercot-retail-market].

HB 46 raised the dispensing organization cap from three to fifteen and added qualifying conditions including chronic pain [cbt-hb46] [dps-tcup]. Each approved organization runs cultivation, processing, and dispensing under one license, so satellite retail locations add meters even when canopy stays at the hub [puc-texas-choice]. Model each SAID separately for REP quotes unless legal counsel confirms a lawful aggregation structure.

Texas' June 2026 average commercial rate was 8.66 cents/kWh [eia-epm-5-6-a], but a 5,000 sq ft indoor facility on Oncor with 75 kW coincident peak and 135,000 kWh/month often lands near 16 cents/kWh all-in once distribution demand and transmission pass-throughs apply [oncor-tariff]. Budget permanent service using peak kW, not EIA state averages.