Deregulation in Texas

In 1999, Governor George W. Bush signed Senate Bill 7 laying out the groundwork for Texas energy deregulation. On January 1, 2002, Texas officially opened the deregulated energy market, giving residents and organizations the power to choose their electric provider. In addition to giving Texans the power to choose an energy provider, this has created renewable energy choices, better customer service, and additional jobs for our Texas economy. Since that time, Texas has become the leading state in the country for deregulating energy, with other states considering implementing this model.

Incumbent power companies like TXU and Reliant favored deregulation. It allows them to expand their market inside Texas as well as enabling more effective energy load forecasting, which increases efficiency and saves money. As required by SB 7, each incumbent split into three companies: a Retail Electric Provider (REP), a Transmission Distribution Service Provider (TDSP), and a Wholesale Generator. These three companies operate as separate entities.

A REP is a company that sells electricity directly to consumers. A Wholesale Generator can only sell wholesale electricity to authorized REPs, and the TDSP is responsible for the delivery and distribution of electricity, maintaining the integrity of the power lines and providing meter reading services. No matter who you choose to be your electricity provider, your TDSP remains the same insuring dependable delivery of electricity to you.

During the early years of deregulation, each incumbent was required by the Public Utility Commission of Texas (PUCT) to adopt a new standard of billing called the Price to Beat, which is a set price they must charge their customers and the PUC had control over.

New REPs to the Texas market were not regulated in this fashion and could offer pricing based on current market conditions. However, each of these new suppliers must meet stringent requirements set by the PUCT to help ensure stability when they enter the marketplace. The influx of new REPs gives customers unprecedented choice in the power market, and has enabled a surge in alternative energy development — particularly wind. Because of deregulation, Texas is the leading producer of wind energy in the U.S.

With the development of deregulation, the PUC created the website powertochoose.org, to actively encourage people and organizations to shop for competitive energy prices. However the Power to Choose website can not provide commercial pricing and does not evaluate contractual language. To date, there have been several cases now where contractual loopholes have racked havoc on unsuspecting Texans.

Additionally, despite the number of options available to residents, the price of electricity remains volatile, and arbitrarily switching REPs without knowledge of current market conditions and contract terminology could potentially result in an unnecessarily inflated electric contract.

When exercising your Power to Choose, it is imperative to understand what you are agreeing to as many contracts will have a severe financial impact if interpreted incorrectly, or if not fulfilled. With more than one hundred registered Retail Electric Providers in Texas now, it is easy to become overwhelmed trying to keep up. Do your research and choose with care.

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Deregulation