The Market

Electric Service Overview

Electricity moves through an interconnected network known as the electrical grid. The collective grid is made up of three separate parts:

  • Generation – the production of electricity by power plants
  • Transmission – the movement of electricity from the point of origin to a distribution system
  • Distribution – the delivery of electricity to customers’ homes or businesses by utility companies

How Electricity is Delivered

First, the electricity is generated at a power plant before arriving at an initial transformer. A transformer converts alternating current from one voltage to another and can be designed to “step up” the voltage or “step down.” In preparation for transmission, the transformer steps up the voltage. Afterwards, transmission lines carry the electricity across long distances before arriving at a neighborhood transformer, which steps down the voltage. Smaller distribution lines then carry the electricity to households, where transformers on the poles step down electricity once more before entering the home. 

Regulated vs Deregulated Energy

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 utility monopolies that own and operate all three parts of electric service. Customers also have to purchase at prices regulated by the state and federal government. 

What electricity deregulation does is allow consumers to choose their own electric company and encourage free market competition. In deregulated areas, prices can be determined and driven lower than in regulated areas because of the competition. In a deregulated place, a person’s electricity is still delivered to them through local power lines. What changes is who they’re buying power, how much they’re paying for it, and the power to choose. 

Texas’ move to full deregulation split the power sector into three parts: generation providers, transmission owners, and retail companies. Today, most of TX is deregulated. However, there are still areas of Texas that remain regulated markets. 

Texas Deregulation

Implications of Deregulation

Deregulation in Texas opens the door to numerous, more flexible energy options thanks to competitive suppliers being able to offer a greater variety of customized solutions. However, it also makes for as many challenges as it does opportunities. 

The sheer amount of competition amongst suppliers has made it much harder for people to comparison shop and identify options that satisfy both their cost and lifestyle preferences. 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. No person can properly analyze and navigate through the hundreds of available electricity choices, even if they claim to be an energy expert. 

Retail Electric Providers (REPs)

The Retail Electric buys wholesale electricity, sets the price of electricity for customers, and sells that electric energy directly to retail customers in deregulated areas of Texas that are open to competition.