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Deregulation 101: How Deregulation Works in Texas

Has deregulation been a good thing for you?

You may or may not agree. Some other consumers may or may not agree with you.

Whatever your opinion, you have to live with the fact that the Texas electricity market is deregulated. In fact, we’re the only state in the contiguous 48 with a completely deregulated electrical grid (Alaska and Hawaii are the others).

But what does that mean for you as a consumer? We’ll cover 3 main points, although there’s plenty more to cover in future posts:

Take a look below to find out how deregulation directly affects your electricity rates today:

1. Your Electricity Rates Have Fallen on Average

There has been some controversy about this. But data confirms that electricity rates for the average Texan have fallen since deregulation in 2002.

Technically, just after deregulation, prices did increase a little until 2009. However, prices fell a lot for consumers from 2010 – 2015.

Way back prior to 1975, cities had the power to set electricity rates. They didn’t have to give too much concern to the rest of the market, or your ability to pay.

But now, REPs, who make the supply of electricity possible to you, compete with one another all over the state. And that competition has lowered your prices just as planned.

2. Still Not Everyone Lives in a Deregulated Market

Most Texans, around 70-80%, have access to retail electric providers and deregulated electricity prices and service.

However, not all do.

Texas law allows rural areas to get their electricity via electric cooperatives. And some municipalities have not been required by law to join the deregulated market.

So some Texans still get their electricity prices handed to them by other centralized authorities.

3. But You Can Experience Price Shocks

You’ve certainly heard the many stories of Texans who have out-of-control electric bills. Consumers who would normally pay $120 monthly saw their bill skyrocket to thousands of dollars during February, when the polar vortex hit.

Most Texans pay a fixed rate for electricity. But, deregulation has allowed some Texans to choose to pay based on the market cost of electricity at any given moment.

The polar vortex led to a massive power supply shortage. This, coupled with incredibly high demand, led to the shockingly high prices you’ve heard stories about.

In addition, the officials in charge of preparing Texas for the Polar vortex really didn’t do a great job of anticipating what would happen.

While in most cases capitalism, the free market, and competition works great for consumers, it has its shortcomings too.

Regardless of your opinion on deregulation in Texas, it’s a fact of life for most. And now you know more about how it works and its benefits.

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