The History of Deregulation of Electricity in Texas

deregulation in texas of electricity industry

You’ll hear the word “deregulation” thrown around in conjunction with the Texas electricity industry, but what exactly does it mean?

In a nutshell, the 2002 deregulation of Texas’ electricity industry opened the doors for competition in the retail electric provider sector of the business, providing options for consumers.

History of Deregulation

Before 2002, one company was responsible for everything related to your electricity: generating it, transporting it, invoicing consumers and acting as a customer service agent.

After four years of discussing deregulation in Austin, one piece of legislation finally became law in 1999. Senate Bill 7 (SB 7), sponsored by Waco senator David Sibley, was passed.

Why would senators and representatives want to deregulate? Senator Sibley and proponents of SB 7 hoped that providing an environment that fostered competition would keep electricity rates low for Texans.

Texans got another benefit from the legislation—the power to choose an electricity provider. Before deregulation, if you were fed up with your service, you were stuck. You couldn’t give your money to someone else because there were no other companies providing the same service.

Now, you can select your Texas electricity provider based on whatever criteria is important to you—rates, quality and cost of customer service, community outreach, corporate responsibility, etc.

How the Deregulated Market Works

If you’ll recall, last week we explored the major players in the Texas electricity industry and their roles. Here’s a brief recap:

  • Generators – These produce your electricity via a variety of methods.
  • Transmission and distribution service providers – These companies, a.k.a. TDSPs, maintain the wires and poles that deliver electricity. If you have a power outage, you report it to your TDSP and your TDSP is responsible for restoring electricity to your home or office. Examples of TDSPs include Centerpoint, TNMP, Nueces, Oncor and AEP.
  • Retail electric providers – These companies are in charge of customer service and billing.

How do all of these companies work together to deliver electricity to you? First, your REP purchases electricity from generators, and then the TDSP distributes power to you. Afterward, the REP invoices you for power and distribution.

Again, Texas’ deregulation only applies to the invoicing and customer service segment of the industry. You can’t choose the TDSP managing the poles and wires, but you can choose your electric provider.

This way, if you switch REPs, you don’t have an interruption in electricity service because the same TDSP will still be delivering the energy to your house through the same wires and poles you’ve been using.

One final note about electricity delivery: It’s important to understand that you get the same level of care from the TDSP regardless of which retail electric provider you choose.

The TDSPs don’t answer to any REPs—the Public Utility Commission is the regulatory body that sets reliability and safety standards for TDSPs. These standards are put in place to protect customers and ensure fair treatment.

Photo courtesy of Stuart Seeger via CC BY 2.0.

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