Before 2002, Texas operated under a regulated electricity market where a single utility company controlled all aspects of distribution, electricity generation, and transmission. However, in the late 1990s, Senate Bill 7 was passed, enabling a shift to a competitive marketplace where consumers could choose their electricity provider. This push for deregulation had its roots in the energy crisis of the 1970s, when monopolies controlled the energy sector, and one solution was in reducing the government’s control over electricity rates.
When deregulation rolled out across Texas, the state needed to determine the entities that would manage day-to-day operations of the power grid. The Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT) were created to fill that gap.
ERCOT manages the flow of power across the state, handles the financial settlement for the competitive wholesale market and administers retail switching for those in the deregulated areas of Texas.
The PUCT oversees ERCOT, and members include retail electric providers, generators, consumers, co-ops, investor-owned utilities, transmission and distribution providers, in addition to municipally owned electric utilities. Transmission companies or TDUs also play a major role in the energy market in Texas.
The TDUs own and operate the equipment such as power lines and poles, along with the facilities that transmit power to the end-use customer. There are five main utility companies in charge of delivering electricity from power plants to businesses and homes: Oncor Electric Delivery, CenterPoint Energy, AEP Texas Central, AEP Texas North, Texas-New Mexico Power.
Deregulation allows residential and commercial consumers to choose their retail electric provider when shopping for electricity plans. The competitive market in Texas now has over 60 retail electricity providers (REPs) offering various products and electricity plans to meet consumer needs in most areas of Texas. Texas energy plans can offer renewable energy like solar or wind, as well as natural gas. Energy providers use creative ways to attract Texans with options such as free nights and weekends, new energy efficient thermostats or planting trees to emphasize a company’s green initiatives. The deregulated market benefits the consumers by allowing choice, diversity, special incentives, renewable energy, and drives both economic growth and innovations.
While about 85% of Texas is deregulated – there are some cities and municipalities that are still regulated by cooperatives. The regulated market in Texas serves around 3 million customers across 76 electric cooperatives and 25 municipalities: Bartlett Electric Cooperative, Greenbelt Electric Cooperative, Brazos Electric Cooperative, CoServ, and HILCO Electric Cooperative are a few of the key co-op players. West Texas Municipal Power Agency, Sam Rayburn Municipal Power Agency, and Sharyland Utilities LP are some of the regulated municipal utilities. Austin, San Antonio, Brownsville, College Station, El Paso, and Garland are larger Texas cities that remain regulated.
The large, deregulated cities in Texas include Houston, Dallas, Fort Worth, Plano and Corpus Christi. In January 2024, Lubbock joined the deregulated energy market in Texas. After a comprehensive study was done prior to their contract expiring with Xcel Energy, Lubbock Power and Light (LP&L) decided to join in deregulation to give their residents and businesses more choices and potentially lower their electricity costs.
The State of Texas is able to be on its own grid due to the abundance of fossil fuels, a leading wind sector, and a plethora of space for solar farms and renewable energy expansion. Texas continues to see growth in the electricity industry. Sectors like artificial intelligence and data centers, and large corporations moving into the state are driving energy growth in Texas. Lower prices on electric bills, incentives, no state income tax are a few reasons people and businesses like Texas and the deregulated energy market.
The U.S. is divided into 3 main regions for electric grids: the Eastern Interconnection (states east of the Rocky Mountains), the Western Interconnection (the Rocky Mountains to the Pacific Ocean) and the Texas Interconnected system. The U.S. Department of Energy (DOE) announced plans to connect Texas’ grid to the U.S. grid. Federal funding would allow for the construction of a 320-mile high-voltage power line that would connect the southeastern U.S. to Texas, with power lines running across Texas, Louisiana, and Mississippi. If Texas’ electricity market is ultimately interconnected with the rest of the country, many feel this would increase the grid’s reliability and prevent power outages, while still offering competitive pricing in this deregulated electricity market