Many U.S. states have deregulated energy markets. But energy in Texas is distinctive because it is the only state primarily driven by its own independent electricity grid — known as the Texas Interconnection. Thanks to this unique system, Texans now have an abundance of energy options to choose from.
Let’s take a closer look at how home energy in Texas works.
Energy in Texas — Deregulation Explained
Energy deregulation — also referred to as “energy choice” — gives consumers the opportunity to choose what electricity company provides power to their home. In Texas’s deregulated electricity market, the system is divided into three main sectors: generation, transmission and distribution and retail.
This sector produces the electricity. Generation companies can be investor-owned utilities, independent power producers or renewable energy creators. The Electric Reliability Council of Texas (ERCOT) oversees this part of the system.
What does ERCOT do?
ERCOT is a nonprofit organization that ensures reliable electricity service to 90% of the state — more than 26 million people. The organization coordinates the flow of power on the electric grid and performs financial settlement for the competitive wholesale bulk-power market.
Transmission and distribution
This sector owns and operates the equipment and facilities, including the poles and wires, that deliver electricity to homes and businesses. These companies are overseen by the Public Utility Commission of Texas (PUCT).
What does the PUCT do?
The PUCT regulates Texas’s electricity (as well as its telecommunication, water and sewer utilities); implements related legislation; and helps resolve consumer complaints against these utilities.
What are the TDSPs in Texas?
There are five TDSPs that serve Texas: Oncor, CenterPoint Energy, Texas-New Mexico Power, AEP North and AEP Central.
This sector is where consumer choice comes in. Retail Electric Providers (REPs) compete with each other to sell electricity to consumers. Some REPs buy energy on the wholesale market, while others operate their own facilities and see the power they generate. REPs offer a variety of contract terms, pricing plans, energy sources and additional services to appeal to customers. Customers can then compare plans and choose the one they want. The PUCT also oversees the retail side of Texas’s electricity market.
How many REPs are there in Texas?
According to the PUCT, the state has more than 130 REPs currently doing business in Texas.
In summary, here are some important things to know about Texas’s deregulated electricity market:
- In areas of energy deregulation, residents can choose their REP.
- You can compare suppliers, plans and pricing to find the option that works best for your home, habits and budget.
- You can sign a contract with any REP that serves your area. You can also switch REPs. (Contract terms and early termination fees may apply, so be sure to check your Electricity Facts Label before making a switch.)
- REPs must compete to earn your business. They often offer incentives for signing up for a plan or other valuable benefits.
What is the Difference Between Regulated and Deregulated Energy?
Here are some of the main differences between regulated and deregulated energy markets.
- Vertically integrated monopolies
- Each utility operates and manages the entire process, from generation to transmission and distribution of power
- Utility decides what mix of resources (i.e. traditional energy, solar power, wind power, etc.) to use to power your home
- Competition among Retail Electricity Providers
- Sector is divided into generation; transmission and distribution; and retail
- You get to choose what mix of resources (i.e. traditional energy, solar power, wind power, etc.) to use to power your home, based on the electricity plan you choose
Where is Energy in Texas not Deregulated?
Electricity is deregulated for about 90% of Texas residents. Most major cities have deregulated energy markets, including Dallas, Houston, Fort Worth, Corpus Christi, Galveston, Waco and San Antonio. Some parts of the state, such as El Paso and Amarillo, do not have as many choices when it comes to their home electricity. These areas have municipally-owned electric utilities (“munis”) or electric cooperatives (“co-ops”) that provide electricity to residents. Munis and co-ops can decide to participate in energy choice if a resolution is passed by their boards of directors or governing body. More information about these groups can be found here.
Tips for Choosing the Right Energy in Texas’s Deregulated Energy Market
Living in a deregulated energy market lets you choose an energy provider whose plans and offerings best meet your needs. Some tips to help you pick the right energy plan for your home in a deregulated market include:
- Compare prices and read provider reviews before signing up for a plan.
- Understand the different fees associated with each plan.
- Look for long-term contracts that offer lower rates.
- Consider renewable energy options if they are available in your area.
- Read the plan’s fine print to ensure you understand the retail provider’s terms.
Outages and Blackouts in Deregulated Energy Markets
No matter what energy market you live in, your electricity is all part of the same grid system. For this reason, no matter which REP you choose — or whether or not you have that choice —you may experience outages or blackouts due to winter storms, extreme weather events or power grid disruptions.
You should always know who to call in the event of a power outage. Remember, TDSPs are the ones who maintain the poles and wires. So in a deregulated energy market, you don’t call the REP you’ve chosen; you call your TDSP.
Navigate the Texas Electricity Market with Everything Energy
Everything Energy provides free energy consulting services to help Texans understand the deregulated electricity market and navigate the choices available. With tailored solutions from a variety of providers, we show customers plan options from trusted REPs that fit their needs and budgets. Our team of experts can help identify potential savings and recommend Texas energy plans that will work with your usage habits and lifestyle. Contact us today to learn more.