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Texas Electric Rates: A Guide to Deregulation

Practically everyone needs electricity – they need it for their homes, businesses and schools. They use it in the winter and summer and during the day and night. In fact, Texas is the largest consumer of electricity in the United States. If Texas were its own country, it would be the 11th largest consumer of energy in the entire world. Since electricity is so important, Texas electric rates affect the lives of consumers in a big way. A huge portion of home and business expenses go toward Texas electricity rates each month.

Texas electricity rates prior to deregulation

Originally, the Texas energy market was regulated. Texas electric rates were established by governing bodies and kept at a level regulators believed would not overburden consumers while still allowing electricity companies to make a profit. At the time, the price for electricity and the price that it cost to transport energy were bundled and billed together by businesses called utilities.

These companies charged Texas electric rates that were set by the Public Utility Commission of Texas. Utilities also were in charge of transporting energy from generation facilities or power plants to Texas homes and businesses. In addition, utilities were assigned to consumers based on their address. Home and business owners simply paid the Texas electricity rates that were charged by their designated utility. Utilities had a monopoly over their allocated regions. Prices were regulated, but the market was not open for competition and consumers couldn’t choose their Texas electric rates.

On Jan. 1, 2002, the market turned a corner.

Deregulation transforms the energy industry

Starting in 2002, the electricity market was open for competition. The Texas Senate accomplished deregulation through the passing of Bill 7. The price for electricity itself and the cost it takes to transport energy were separated. Texans are now free to choose to buy their energy from a retail electric provider, also known as a REP.

Utilities now generally handle only the transmission and distribution of energy. These companies still are in charge of making sure your energy arrives at your home or business. Utilities maintain and repair all electricity lines and are the companies that Texans call if they experience a power outage.

The Texas Senate phased in deregulation over a period of several years in order to encourage competition among businesses. The Senate included in Bill 7, a “price to beat,” or PTB. The PTB was a regulated rate that only small budding electricity retailers could charge. Already established companies were required to charge higher Texas electricity rates in order to give the newer retailers a fair chance to flourish in the market. The PTB gave small businesses a competitive edge and encouraged consumers to reconsider staying with their old company. This transition period in the market lasted until Jan. 1, 2007.

How the power to choose Texas electric rates affects you

Consumers can choose which REP they wish to buy electricity from. Since providers are competing for business, they offer a range of energy plans and Texas electricity rates. A goal of deregulation is to ensure competition among different businesses and affordable Texas electric rates for consumers.

Electricity plans

Energy plans are as diverse as the consumers who buy them. When you’re looking for the best electricity plan for your home or business, take a look at what’s available in your area. Generally, availability of products is according to ZIP code.

Obviously, as a customer you should compare rates from different companies. You’ll typically find that REPs offer variable and fixed rates. Variable-rate plans reflect the fluctuating price of electricity. If you choose a variable-rate plan, your energy supply rate each month will be based on the current market price for electricity. Unlike variable rates, fixed-rate plans allow clients to lock in their supply rate for electricity. Frequently, companies also offer different billing and payment methods, such as automatic and paperless billing. As for products, you can choose whether or not you wish to purchase a green energy plan.

Electricity companies

REPs also come in all shapes and sizes. Some companies have been around long before deregulation, whereas others are newer to the industry. Some retailers are large corporations with great clout, while others provide the personal touch that comes with a small business. Certain companies even offer customer rewards. Read up on various electricity providers and you’ll also see that retailers frequently donate to local charities as well.

Exercise your power to choose Texas electric rates and see whether you can save significantly on your energy bills. Use to get the full scoop on the energy market and how you can use deregulation to your advantage.