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About Texas Deregulation Electricity Benefits

By Lela Perkins

The Texas Deregulation Electricity experiment stands as one of the biggest ever shifts of an entire sector from quasi-public services to the private industry. The law (SB 7) deregulating the state’s electric power supply market came into force on Jan 1, 2002. Its provisions were gradually phased in over several years.

Details about this deregulated system and how it is working out are examined below. Before SB 7, utility customers in a service area had limited or no options whatsoever in terms of rate plans, billing and electricity infrastructure. The new law allowed consumers to shop around and pick a provider, so long as the area was not covered by a cooperative or municipal utility.

The monopoly of a single utility over everything from power plants to transmission, sales and billing was replaced with multiple providers. These companies, known as REPs or retail electric providers, would compete among themselves to acquire and retain customers just like any other industry. Customers could shop around, chose the one they liked best and ditch their old utility.

The Electric Reliability Council of Texas was created to make sure the market remained competitive and no one provider gained a monopolistic hold over a service area. ERCOT was also tasked with monitoring the system to make sure REPs continued to meet the standards required to maintain grid reliability. The competition was supposed to improve the level of service while providing lower rates and more choices for customers.

The original utility which had previously held a monopoly in its service area would still own its power lines. Customers in the area would call the same company for outages. But the utility would now be competing with other REPs to get and retain customers.

Another innovation was the introduction of electric power brokers and aggregators. Since there was competition to gain customers, REPs started offering lower rates for an aggregated group of customers, as opposed to the standard rates for individuals. Brokers who had affiliations and links with many different REPs were now helping consumers shop around to get the best possible deal.

The result of this experiment was a wholesale shift of customers from their existing providers to new REPs offering more competitive services and rates. At least 85 percent of industrial and commercial power company consumers have changed their electricity provider once or more in the last decade. Around 40 percent of residential customers have likewise moved from their earlier utility to a new REP.

If nothing else, the Texas Deregulation Electricity project has converted a few bloated utilities into a market full of nimble private operators. Any REP that does not perform gets the boot as customers have many more options. On the other hand, this market-based system allows providers to hike rates based on demand. With the Texas economy thundering along nicely, there’s a huge demand for electricity as the number of new businesses and homes keeps increasing. As of now, the average rates charged by the deregulated REPs are higher than the regulated rates under municipal utilities such as the one in Austin.

You can visit the website www.enertelconnections.com for more helpful information about Texas Deregulation Electricity Pros And Cons

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Article Citation
MLA Style Citation:
Perkins, Lela "About Texas Deregulation Electricity Benefits." About Texas Deregulation Electricity Benefits. 8 Apr. 2014. uberarticles.com. 25 Sep 2014 <http://uberarticles.com/home-and-family/about-texas-deregulation-electricity-benefits/>.

APA Style Citation:
Perkins, L (2014, April 8). About Texas Deregulation Electricity Benefits. Retrieved September 25, 2014, from http://uberarticles.com/home-and-family/about-texas-deregulation-electricity-benefits/

Chicago Style Citation:
Perkins, Lela "About Texas Deregulation Electricity Benefits" uberarticles.com. http://uberarticles.com/home-and-family/about-texas-deregulation-electricity-benefits/


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