Deregulation of Electricity in Texas

The History of Deregulation of Electricity in Texas

Before 2002, there was an electricity monopoly that ruled the Texas market, the PUCT (Public Utility Commission of Texas) it was regulated by the state government. That meant that there was a single provider of electricity service in each Texas City. That sole provider was responsible for setting kWh (Kilowatt per Hour) rates, along with the generation, transportation, billing, and customer service for all electricity services.

In 1999, the Texas Legislature wanted to reduce government control of electricity rates and eliminate monopolies in the energy market by passing a deregulation law. That meant that multiple Retail Electricity Providers (REPs) could compete against each other for market share, which would theoretically drive electricity prices down for consumers. This deregulation law was Senate Bill 7.

Texas Senate Bill 7 was approved in 2002 and according to the law; deregulation was to be phased in over the next several years. As a result, 85% of Texas electricity consumers have the ability to choose from a variety of REPs for their electricity service. That includes the incumbent utility. (Some cities, such as San Antonio and Austin, Texas remain regulated.) The incumbent utility still maintains and owns the local power lines and is not subject to deregulation, but is the company customers should call in the event of power outages.

Since 2002, approximately 40% of residential electricity consumers in deregulated cities have switched their electricity service from the former incumbent provider to a competitive Retail Electric Provider (REP). That is likely due to more competitive kWh rates and the countless number of promotions available to consumers, like the Freedom Plan offered by Now Power, which eliminates all costly Terms of Service Fees from electric bills.