Texas Electricity Rates

Texas electricity rates are deregulated, a unique proposition in the world of electricity market. Texas senate bill 7 that outlined the deregulation process had an impact on the Texas electric companies and on the electric power consumers. How can you, the individual electrical power consumer maximize the advantages deregulated prices can provide you with and how can you avoid the pitfalls?

Texas Electrical Power Facts

Texas is the number one state in electrical power consumption and the biggest electric power market in the US; Texas electrical market is comparable to the electrical markets of Great Britain and Spain, both in the opening ten on the list. The state of Texas started to deregulate the market in 2002, the time when Texas Senate Bill 7 came into power. The main purpose of Bill 7 was to let free market competition to establish the Retail Price of electricity while hoping for cheaper Texas electricity rates to the consumer compared to regulated market prices. Because a minor portion of the Texas electricity market including the bigger Austin metropolitan area remained a regulated market, there is a yardstick against which deregulated prices can be measured. After 9 years, the average deregulated price is a bit cheaper than the average price in Austin and other parts of the US. Nevertheless if an individual customer has made a wrong decision in choosing the Retail Electric Provider, this individual might find himself paying more than the average.
One drawback of the deregulation plan is that it does not address the worthy goal of reducing electrical power consumption and energy saving. On the contrary, cheaper prices might lead to higher consumption.
On the sunny side though, the plan clearly defined a goal for clean energy power plants, such as solar power plants and wind turbines.
A by product of the process was rapid building of natural gas power plants because they can be built faster than coal burning power plants.

The Structure of any Electrical Power Market

Power Generation, Transportation and Distribution

A traditional electrical power network is structured from the following:

Power Plants: A power plants is a complex of buildings, generators, and control equipment that convert a source of energy into electric energy. The most used sources of energy are coal, natural gas, nuclear reactions and hydroelectric.
Transmission (transportation) Lines: Super high voltage, very long distance power lines that are used to transfer large amounts of electric power from one location to remote locations. Transmission lines are the equivalent of the freeways system.
Distribution System: The distribution system carries energy to individual consumers. This is the part of the electric grid the consumer is connected to. It is very much like the mesh of roads and streets.

In some regions one electric company owns the entire network; that company generates, transmits and distributes electric power. In other regions, the network is owned by separate companies; Generation companies that own and operate the power stations, transmission companies that own and operate the super high voltage power lines and distribution companies that connect the consumers to the grid.
In the wake of small size and medium size renewable energy power generators, namely solar power for homes and small wind turbines, power generation is partially distribute at the grid outer edges on consumers' premises.

What is the added element in Texas?

Unique to Texas and with much influence on the Texas electricity rates was the formation of Retail Electric Providers (REP); An REP is a company that buys electricity at wholesale prices and sells electricity at retail prices to its customers. RFP companies compete to get market share in the regions of Texas in which they are active.