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What You Need to Know About Texas Energy Deregulation

Shopping for an electricity company in the Lone Star State these days is as easy as the Texas Two-Step. Not only do we have a lot of choices in providers and plans, but all the information we need to make an educated decision is typically just a few clicks away. As straightforward as this is today, it wasn’t always this way. Not long ago, Texans couldn’t choose who their provider was. If they were unhappy about the service they were receiving or the rates they were paying, there just wasn’t another option. That is, until the state deregulated its electricity market in 2002. What does this mean for you? Read on to see all that you need to know as a consumer about electricity deregulation in Texas.

What Does Energy Deregulation Mean?

For consumers like you, deregulation means that you can choose from multiple Retail Electricity Providers (REPs) if you live within a deregulated area in Texas. Having multiple REPs in an area gives you the chance to pick the electricity company with the best plan, pricing and incentives while also making it easy to switch. Before deregulation, local electric utilities controlled every step of the process, from generation and transmission to customer service before deregulation. These vertically integrated utilities were the only provider in an area, which created monopolies and caused increased rates. 

Although Texas has the largest deregulated electricity market in the country, there are still some cities in the Lone Star State who have chosen to stay regulated. Doing so means that those that live in these cities, like Austin or Brownsville, have only one option for their electrical provider. 

How Does Energy Deregulation Benefit Me?

This is the most important question of all. The deregulation of Texas’ retail electricity market benefits consumers like you by: 

  • Increasing local competition by having more providers to choose from
  • Incentivizing providers to provide better incentives, customer service and lower rates
  • Making it easier to switch electric companies
  • Diversifying the available product offerings on the market, from long-term, fixed-rate plans to those fully renewable options
  • Providing greater access to plan information, enabling you to shop for plans with confidence

Why Was Electricity Deregulated in TexasWhy Was Electricity Deregulated in Texas?

The stated goal for Texas Senate Bill 7 was to decentralize the generation and delivery of electricity and use competition to lower rates and provide more options for consumers. However, the root of the deregulation movement can be traced back to November 1965, when a blackout left about 30 million people in the northeastern USA and Ontario, Canada without power for more than half a day. This led to the creation of the National Electric Reliability Council, which split the American electric grid into smaller regions for more efficient management. The Lone Star State’s regional entity, known as the Texas Reliability Entity (Texas RE), is a nonprofit corporation that enforces national reliability standards in the area served by ERCOT. 

The Energy Policy Act of 1992 opened the door for deregulation nationwide as part of a broader effort to reduce dependence on petroleum, improve air quality and increase clean energy use. Texas, along with California and New York, is among the nearly 30 states in the country with deregulated electricity markets.

When Was Texas Energy Deregulated?

Passed in 1999, Texas Senate Bill 7 deregulated the state’s electricity market. When the law took effect in 2002, the impact on the industry and consumers was profound. Whereas the generation, distribution and customer service aspects of power delivery were handled by individual utilities, the deregulated market separated them. REPs are the providers that you buy electricity from. There are more than 130 REPs in Texas. All REPs are required to register with the Public Utility Commission, which controls how REPs sell power and oversees how the Electric Reliability Commission of Texas (ERCOT) operates the electricity grid. Meanwhile, Transmission and Distribution Service Providers (TDSP) own and manage the power lines and transformers, while power generators produce and sell electricity on the wholesale market. REPs purchase the electricity and then sell it to you, the consumer.

Who Regulates Electricity in Texas?

When we talk about deregulated electricity in Texas, that doesn’t mean that it’s the Wild West here. Deregulation refers to how the market works and the choices that consumers can make. We may have a deregulated electricity market, but the state still regulates how power companies operate. Here’s how it works:

  • Who Regulates Electricity in TexasPublic Utilities Commission of Texas – The PUCT is responsible for protecting customers and ensuring that all players within the Texas electricity market follow the rules. It does not set the price of electricity that is charged to consumers, but it does set the delivery charges that pay for the transmission poles and wires. You can also submit complaints on the PUCT website, which also has information about consumer rights that all Texans should be aware of. The agency also approves larger electric transmission line routes and is involved with water and telecommunications utilities.
  • Electric Reliability Council of Texas – ERCOT is a membership-based nonprofit corporation that manages the flow of electric power to more than 26 million Texans. It is responsible for maintaining system reliability, facilitating competitive retail and wholesale markets and ensuring free access to transmission. ERCOT doesn’t make the electricity or own any transmission lines; instead, its job is to make sure the grid is working as it should be and that power is reliably delivered to Texans. ERCOT is subject to oversight from the PUCT and the Texas Legislature.
  • Texas Reliability Entity, Inc. – The TRE is the regional entity that represents much of Texas in the North American power transmission grid. It’s one of the six regions within the North American Electric Reliability Corporation (NERC), a nonprofit, self-governing corporation created after the passage of the Energy Policy Act of 2005 to develop and enforce compliance with mandatory reliability standards. Here in Texas, the TRE works with ERCOT to develop, monitor, assess and enforce compliance with NERC reliability standards.

How Much of Texas Does ERCOT Cover?

ERCOT covers about 90% of Texas’ power load, which includes more than 1,100 power generation units and 52,700 miles of transmission lines. This makes up about 75% of the Lone Star State’s land area, excluding only El Paso and far West Texas, parts of the Texas Panhandle and East Texas from Bowie County south to Jefferson County. All told, ERCOT’s coverage area encompasses 214 of Texas’ 254 counties. 

Which Cities are Deregulated?

If you’re a Texan, chances are you live within ERCOT’s coverage area. Just because a county or city is within ERCOT’s boundaries does not mean it is deregulated. For example, Austin chose to stay regulated, so Austin Energy is its sole electricity provider. Still, there are nearly 400 deregulated cities in Texas; some of the largest of which are: 


Which Cities are Still Regulated?

Although much of Texas is deregulated, there are some notable exceptions. These include:

  • Austin
  • Brenham
  • Brownsville
  • Bryan/College Station
  • Fredericksburg
  • Georgetown
  • Kerrville
  • New Braunfels
  • San Marcos
  • San Antonio

What it All Means for You

Texas has the largest deregulated retail energy market in the country. With deregulation comes the power to choose the provider that gives you the perfect plan with the right pricing and top-notch customer service you deserve. There are a lot of choices out there, which makes the market competitive and innovative. 

If you’re looking for an electricity plan for your home, we’re here to help. At Lone Star Energy, we offer straightforward, fixed-rate power plans with competitive rates and none of the flashy gimmicks. Check out our plans in your area to get started. 

About Lone Star Energy

In a world of increasingly complicated electricity plans, we’re here to cut through all the jargon. We believe powering your home should be easy, which is why we offer no-nonsense options and first-rate customer service by our straight-talking, hard-working professionals. Ready to simplify your electricity plan? Get started today.

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