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Texas Electricity Deregulation, What Does That Mean?

deregulation

I've heard a lot of talk in the past regarding deregulation in Texas and to be honest, I never really knew what that meant. Even though I have lived in Houston for the majority of my life, I am slightly embarrassed to admit that I never paid much attention to things like the electricity market or even the oil and gas market. I know a little bit about these industries on a high level, but have no real clue about anything in detail. So when I heard that Texas had become deregulated, I had no idea what that meant. The only things that came to mind were questions. What is the difference between regulation and deregulation and quite frankly, why should I care? How does that impact me? This is what I found.

Before Texas electricity became deregulated, it was regulated by the state government. The electricity rates were set by the Public Utility Commission of Texas (PUCT), and there was only one provider of the electricity service in each market. That single company was responsible for generating, transmitting, distributing and selling to the consumer. With there being only one company that provided electricity for each city that basically created a monopoly. And from what I've seen in life and when playing the board game - when one person owns everything they often times don't act in the best interest of others.

Why change what had been "working" for many years? Well, back in 1999, the Texas Legislature thought that by passing a deregulation law, they could get rid of electric company monopolies and reduce government control of electricity rates. The idea was that multiple Retail Electricity Providers (REPs) would create competition, and competition would drive energy prices down. So it made sense theoretically, and the bill passed.

Since then, the majority of Texas has become deregulated except for about 25% that stayed the same. Since it passed, it allowed consumers to choose where they buy their power (just like they can choose their long-distance phone company). This allowed for competition for the retail component of your electricity service and spurred the creation of multiple REPs. You can find a current list of providers on a website called PowerToChoose.org or Electricity Choice Texas. Also on these website you can do some price comparisons between various retail electricity providers in your area.

So was the change to deregulation worth it? The jury is still out, but the consumer has experienced immediate results that have altered buying habits and energy consumption. Early results include increased consumer protection through the elimination of monopolies and the emergence of competitive forces. Additionally, deregulation has created jobs through the start-up of multiple REP's, including Bounce Energy. On the flip side, for the majority of the time Texas has been deregulated, electricity prices have actually gone up, not down. In fact, Texans are consistently paying rates higher than the national average. Some even argue that large corporations are relocating manufacturing facilities to other states to take advantage of lower electricity costs. It is hard to judge whether this is the impact of deregulation, or market prices in general, but should be noted.

One thing is for sure: stakeholders will continue to argue the merits of deregulation for years to come. Less government control can be viewed as a positive force towards innovation and growth or a negative breeding ground for greed and fraud (see mortgage/banking industry). Lawmakers, consumers, providers and professors will debate the good and the bad, which hopefully will lead us to a refined policy that benefits all involved. For now, I will exercise my power to choose green energy, excellent customer support, and low electricity rates through Bounce Energy.



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