How Deregulation Works

From The Power Plant To Your Electricity Bill

 

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A Brief History

On what is remembered by historians as a magical evening on September 4, 1882, Thomas Edison’s first commercial power plant changed the way we see the world and interact forever for 800 homes. This marvelous new innovation has provided what is seen as one of mankind’s most influential inventions in modern history.
Almost overnight, the revolutionary new technology  grew from what was considered to be just a luxury for America’s elite to what is now a $900 billion industry.
 Considered the last true monopoly in America,  by 1999 lawmakers in Texas, New York, Massachusets, Pennsylvania, Rhode Island and California had enacted legislation to allow for competition moving away from the tariff structure which had been in place for decades. This new market structure would go on to be called deregulation of the electricity and natural gas markets.

Electricity Change In Texas

At midnight on Jan. 1, 2002,  the Texas lit the fuse of change on a colossal level. The state would no longer allow huge, vertically integrated utilities to monopolize the residential and business customers. Electricity companies, now called, Retail Electric Providers (REPs) would compete for customers in most of the state. A new free market was born. Texas would now have the power to choose their own electricity supplier without fear of power loss or degradation of the electricity service itself.

How It Works

In Texas, the structure is relatively simple. Retail Electricity Providers purchase electricity supply and sell it to customers at a rate per kWh. There are over 200 Retail Electricity Providers all vying for the right to call you their customer. But the electricity itself is actually transported to your home or business via a local utility.

Regardless of which, Retail Electricity Provider you choose, the actual electricity still comes from the same power generation plants and the same transmission and distribution lines they always have.

In the illustration below you can see the path of electricity from the series of generation plants in Texas which supply power to the Texas energy grid which includes the transmission and distribution lines that carry power to your home or business.

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The actual maintenance and support for the lines that carry power to your home business are maintained by one of 5 Transmission & Distribution companies in Texas, also called local utilities. These local utilities are:

  •  Centerpoint (Houston Area)
  •  Oncor (Dallas Area)
  •   AEP (South Texas)
  •   WTU (West Texas)
  •  Sharyland (Midland)

These local utilities are responsible for the infrastructure, wires, poles, and meters to support the transport of electrical current from the generators to you.

They are also who you call in the case of an outage, new meter installation, meter reading or disconnection.

The Retail Electricity Provider provides your billing and is also responsible for collections on those bills unlike in other states like New York where the utility also handles the electricity billing to the customers.

In Texas, each Retail Electricity Provider purchases electricity supply at wholesale prices with the intent to resale it to homes and businesses.

Because the electricity supply in Texas is primarily generated with natural gas, which is a traded commodity, the rates offered can differ depending on when the supply was secured.

This is why it is vitally important to shop for rates for your home or business. Timing is everything.

To see the current rates in your area click here