You are currently viewing Electricity deregulation and its effect on Texas

What electricity deregulation does is allow consumers to choose their own electric company and encourage free-market competition. Texas moved to full electricity deregulation in 1999, splitting the power sector into three main components: generation providers, transmission owners, and retail companies. Today, the state is mostly a deregulated electricity market. However, there are still areas of Texas that remain regulated markets.

In 1999, George W. Bush signed Texas Senate Bill 7 into law, paving the way for the deregulated electricity system that is now at the center of the state’s woes. The law (which went into effect in 2002) removed controls on wholesale electricity prices and worked toward eliminating tightly regulated local monopolies.

In regulated electricity markets, customers cannot choose their provider and are bound to the utility in that area. They have no choice but to purchase electricity from regional monopolies that own and operate the entire electric system. Customers also have to buy power at prices regulated by the state and federal government.

Effects of energy deregulation

Energy deregulation dramatically impacts the lives of Texans and the market participants, including the electricity companies. Some of the most significant effects are as follows-

  • Probably one of the most critical aspects of deregulation is that it gives consumers the power to choose. Consumers can now select their electricity suppliers for their residential and commercial establishment. They can also compare and choose the suppliers based on their services and the rates that suit their goals, just like they select any other household item. Consumers need to know that the same local power lines deliver a person’s electricity regardless of who they’re buying it from or how much they’re paying for it.
  • Another significant effect of deregulation is the elimination of the energy monopolies that used to set the electricity rates. With deregulation, energy companies have the flexibility of offering their customers competitive prices and a variety of products. This dynamic can create mutually beneficial relationships for consumers and providers when properly provided and wisely selected.
  • Deregulation in Texas opens the door to numerous, more flexible energy options, thanks to suppliers being able to offer a greater variety of solutions. However, it also makes for as many challenges as it does opportunities. With so many different types of rates, plans, contract terms, hidden fees, etc., there is a general lack of transparency and a sense of confusion. The sheer number of gimmicks and marketing makes it much harder for people to compare and identify options that satisfy both cost, lifestyle, and preferences.
  • As energy companies realize that competitive prices and marketing alone are not enough to build customer loyalty, there is an increase in innovation and customization. Leading energy companies are dedicating more time and effort to understand their customers’ needs and serve their expectations better. The utilities of the future are embracing a new era of consumer empowerment with more transparent and mutually beneficial relationships.

Key Players in Texas’ Electricity Deregulation

There are several groups or organizations that are involved in monitoring, maintaining, regulating and selling electricity deregulation in Texas. These key players include,

Public Utility Commission of Texas –

The Public Utility Commission of Texas regulates the state’s electric, telecommunication, and water and sewer utilities, implements respective legislation, and offers customer assistance in resolving consumer complaints. The PUC of Texas is responsible for maintaining and enforcing regulations surrounding the generation, transmission and supply of electricity. It also offers customer service related to its services in order to resolve disputes between consumers, utilities or REPs.


Electric Reliability Council of Texas (ERCOT) – 

This council manages and maintains the flow of Texas power grid and handles 90% of Texas’ electric load. It monitors and manages more than 1030 power generation units and more than 52,700 miles of transmissions lines across  Texas. ERCOT supports the supply of stable electricity to 24 million Texans. ERCOT is managed by the Public Utility Commission of Texas, in response to Texas Legislature. Some of the biggest metro areas within ERCOT’s service areas include, Houson, Fort Worth, Dallas, Corpus Christi, Midland and Odessa.

ERCOT has four primary responsibilities

  • Maintain Texas power system reliability.
  • Facilitate a competitive wholesale market.
  • Facilitate a competitive retail market. In other words, enable Texas Electricity Deregulation
  • Ensure open access to transmission.


Utilities – 

In many countries around the world, a utility is primarily responsible for the generation and distribution of electricity within all spaces: residential, commercial, industrial, etc.  In Texas, there are five main TDUs, (each assigned to a service area based on geographical location). These include:

  • CenterPoint – CenterPoint serves roughly 2.5 million customers in the local Houston Metro Area alone, including:
    • Angleton
    • Alvin
    • Cypress
    • Galveston
    • Houston
    • Pasadena
    • Richmond
  • Oncor Electric Utility Company –  With 120,000 miles of lines and 3 million electricity meters, Oncor provides electricity distribution and transmission services in central and west Texas. Cities served by Oncor include the
    • Dallas Fort Worth metro area
    • Midland
    • Odessa
    • Killeen
    • Waco
    • Wichita Falls
    • Tyler
  • Texas-New Mexico Power Company
  • AEP Texas Central Division
  • AEP Texas North Division


Electric Cooperatives (Co-ops) –

Co-ops provide electricity to residential customers via low-voltage power lines. In Texas, co-ops are a part of the Texas Electric Cooperatives (TEC). It includes, 11 generation and transmission and 64 distribution cooperatives. Established in 1941, TEC continues to operate today, with a focus on 7 principles including, voluntary and open membership, democratic member control, members’ economic participation, autonomy and independence, education, training and information, cooperation amongst cooperatives, and concern for community.

Retail Electricity Providers – REP’s

At the heart of the Texas Electricity deregulation are the retail electricity providers. These are the light companies who offer customers power rates, energy services, and electricity plans. There are many Retail Energy Providers in Texas, some of these REPs include:

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