Energy deregulation in Texas has been set in place for more than 10 years already and has given the people of this state as well as others the power to select their electric company or retail provider. Although the Texas consumer gained certain unique benefits with the deregulation of Texas electric companies particularly on retail distribution, some people are still confused about how the process of energy deregulation actually works particularly on the roles of electric companies and other players in Texas’ energy market.
To better understand how energy deregulation actually works, the consumer should have a firm understanding of what roles each player in the energy market has. In its most basic sense, energy deregulation applies only to the retail providers, with the manufacturing and transmission component remaining intact and unaffected. Each of the major elements in the market: generation, transmission, and retail – each of which is a distinct electric company in itself – plays a major role in ensuring that the Texas consumer receives electrical energy in an efficient and reliable manner.
A Historical Perspective
During the old days of energy grid monopolies and before energy deregulation was ever put in place, a single electric company provided all the components of the utility from generation, to transmission and distribution and finally to retail. When energy deregulation was institutionalized, it revolutionized the energy market in states like Texas and California where the system was implemented and created better competition among existing and emerging electric companies.
Energy deregulation also paved the way for renewable and considerably cheap electricity sources to enter the energy market, resulting in more choices for consumers particularly the option to choose environmental friendly sources of electrical energy.
The Current Structure in Texas
The following describes the currently deregulated structure of electrical power generation and distribution in Texas and among Texas electric companies:
* Power Generation
These electric companies are responsible for the generation of electrical energy through various means including the use of fossil fuels, coal, biomass, hydroelectric, natural gas, nuclear, solar, and wind energy. Power generation is not affected by energy deregulation as these power plants produce and sold to the distribution and retail electric providers. These Texas electric companies, particularly the leading wind energy generators in the country, provide a considerable portion of energy capacity not only for Texas but for other parts of the United States as well.
* Transmission and Distribution
Texas electric companies responsible for transmission and distribution are called Transmission / Distribution Service Providers or TDSP. These companies remained the same after energy deregulation was implemented as they continue to have control and maintenance of electrical transmission infrastructures. TDSPs continue to be responsible whenever electrical lines are down, and will provide the repair and maintenance needed should this eventuality take place. Electricity they own can also be sold to the retail providers aside from charging them monthly maintenance service fees.
* Retail Distribution
Texas electric companies that were directly affected by energy deregulation are the Retail Electricity Providers or REP’s. These are the entities that sell electrical service to consumers, whose accounts can be monitored through the monthly electrical bills sent to them by the REPs. These companies turns a particular service on or off and is responsible for directly communicating with end consumers. Energy deregulation spawned the emergence of various Retail Electricity Providers which compete for consumer attention through discounts, rate plans, incentives, renewable energy options and quality of customer service.