How Texas Benefits from the Deregulated Electricity Market

January 1, 2002, was a historic day in the state of Texas. It marked the first day Texas residents could act as consumers in the state's deregulated electricity market. Before this time, residents were subjected to high electricity rates and the monopolistic control of the utility company in their area.

As foreign as this concept seems to many current Texas residents, 12 years after the market was deregulated, a lack of choice is common in most of the country. To date, Texas is one of only 17 states, along with Washington D.C., in the nation with a deregulated electricity market. Citizens in states without a deregulated electricity market commonly purchase power from their local municipality. It is common in these states for a single provider (typically the utility company) to handle the electricity service, distribution and customer service in a given region.

This was once the norm in Texas until Texas Senate Bill 7 changed the landscape. 85% of Texas now experiences the benefits of energy choice brought by deregulation, as numerous Retail Electricity Providers (REPs) openly compete with another. The goal, as argued by proponents of the bill, was to keep energy costs down and allow for additional options in the marketplace – both of which would benefit consumers.

The Benefits

Twelve years after Senate Bill 7 was passed, Texas' deregulated electricity market is serviced by numerous providers. Not all providers conduct business in every corner of the state, but consumers still have the benefit of choosing their electricity service from one of several options, no matter where they live in the deregulated regions of the state. This benefit was not enjoyed in the days before Texas energy deregulation.

The deregulated energy market has also forced REPs to invest in research and development in order to attract customers and stay ahead of their competitors. As a result, Texas' green energy market continues to develop, and some providers in the market now specialize solely in green energy options in order to draw customers who place environmentally friendly energy sources as their top priority.

The development of renewable energy sources is perhaps most apparent in the wind energy market where Texas can boast an installed capacity of more than 28 gigawatts of power, more than double the capacity of runner-up states including Iowa, Oklahoma and Kansas.

Traditional energy utilities are making investments, too -- particularly in low-pollution natural gas powered generation plants, helping Texas cement its status as the nation's largest natural gas producer. Between these new sources and the investments in renewable energy, Texas' electrical grid is more reliable than ever, making periodic heat-related blackouts virtually a thing of the past.

Another way in which deregulated electricity is strengthening Texas' electrical grid is through a system of energy efficiency incentives for electricity customers. Programs like rebates for ENERGY STAR certified appliances, free home energy audits and credits for installing solar panels are administered by electric transmission and distribution utilities to help the state reach its energy efficiency goals. These programs not only help Texas residents save money, they reduce the strain on Texas' electrical grid.

Texas consumers also have access to smart thermostats, rewards programs and unique incentives simply for enrolling in a plan and paying their bill on time. Competition has brought these programs into place as providers had no reason to incentivize their contracts before Senate Bill 7 was passed.

In order to foster this competition and ensure a truly open market, consumers must be able to change plans quickly. The Texas deregulated market does not miss this mark, and most plan transitions take place in seven days or fewer, all without a loss of power to the consumer. This ease allows the market to remain fluid and movement is common.

Customers have the freedom to switch providers and plan types as variable rates, fixed rates and prepaid rates are all available. This allows consumers the chance to not only customize their contract length but also their payment structure.

How does Texas benefit from the deregulation of its electricity market? By ensuring that consumers have the electricity choice they deserve, the REPs can innovate while providing the market with competitive electricity rates and plan diversity that you simply can't find in most other states.