History of Texas Deregulation

In 1999, the Scanstockphoto7953784tate of Texas decided to deregulate their energy industry, allowing consumers to choose a plan that suits their particular needs. Not only can they choose their own plan, but consumers can also choose who provides that plan to them. On January 1, 2002, Texas Senate Bill 7 took effect, and the energy market became an open market for consumers to choose from. Where previously it was a sort of monopoly, the energy sector of Texas split into three major parts: Power Plants, TDSPs, and REPs.

  • Power Plants — Power plants are where the electricity is generated. These include coal fired plants, geothermal, solar, and wind plants. After the deregulation, many new plants opened up, providing cleaner and more efficient energy. After generating the electricity, the power plant sells it on the open market.
  • TDSPs — Transmission and Distribution Service Providers maintain the power lines that carry the electricity to your home, as well as read your meter to determine your home’s energy use. They also take care of any outages that occur. TDSPs are monitored and regulated by the Public Utility Commission (PUC) of Texas.
  • REPs — Retail Energy Providers are the companies that you actually purchase electricity from. TDSPs report the electricity usage to your REP, and the REP charges you your rate per kilowatt hour times the number of kilowatt hours used. Each REP will have plans with different rates, which can be based on using a set amount of electricity per month, or whether you wish to use renewable energy credits.
  • ABCs — In addition to the major parts of electricity generation, sales, and distribution, there are Aggregators, Brokers, and Consultants. Brokers, like Shop Texas, compare the rates and service plans of several REPs to help customers choose a plan that suits them. Aggregators will take a group of clients that have similar energy needs and shop for a REP. By grouping several clients together, an aggregator may be able to get a sort of bulk discount on energy rates from one particular REP. A consultant will work with a client to get detailed information regarding REPs. This includes reliability, customer service, rates, and cost savings. Consultants may be able to get a custom rate for a client.

The reliability of your electrical service has not changed since the deregulation bill took effect. When switching providers, you typically can set a set a switch date, which allows your electricity to continue flowing uninterrupted by overlapping your previous REP with the new one. Once you are switched to your new REP, you’re all set! Keep in mind that some REPs may have an early termination fee if you switch before your contract ends. However, there are no other fees for switching providers.

Unfortunately, not all parts of Texas are deregulated. About 15% of communities are serviced by municipalities, cooperatives, or investor-owned utilities, and as such cannot choose their own REP. The Power to Choose website lists all of the areas that are totally deregulated, so you can see if your community is on the list.