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What is Energy Deregulation in Texas?

What does energy choice mean for you?

Whether you’re a native Texan, or you’re making Texas your new home, there’s a good chance the you don’t think about how the energy market in the Lone Star State works – until it’s time to pay your energy bill, of course!

 Here are the basics:

Energy deregulation in Texas essentially means that you, as a consumer, now have the power choose the electricity provider that’s right for you and your home. Also known as energy choice, you have all the power in the energy relationship – as in, if you don’t like your current company, you can switch to another one that you like more.

So how does deregulation work, and how does it affect you?

History of Deregulation

Before the Texas energy market in was deregulated, the energy markets were controlled by the utility companies in concert with the state government. Each local utility was the only energy provider in each market, and the rate they charged was determined by the Public Utilities Commission.
As a consumer, you relied exclusively on the utility company for your area to generate, transmit, and distribute your electricity and natural gas. With only one local utility in each market, this monopoly-style arrangement left the consumer at the mercy of their utility company. You had to pay whatever rate the utility company charged, and that rate could literally change every single bill. It was quite frustrating for homeowners and business owners.

Ushering in Change

So what spurred the initiative to deregulate the energy industry? In a move to cut back on government control of energy rates and break up the monopolies these local utilities created, the Texas Legislature passed deregulation laws in 1999 with a start date of 2002. These laws envisioned a deregulated energy market made up of independent retail energy providers with the idea that encouraged competition would lower energy rates for you and your fellow consumers by giving YOU the power to choose your electricity provider.

The Impact of Deregulation on Texas Consumers

Since 2002, the majority of Texans (85%, in fact) has opted to deregulate local energy markets. Just like cable or internet, you can now choose who you get your energy from. As the legislature intended, many retail energy providers, like Spark Energy, were formed. The abundance of choice created competition within the market, driving down energy rates for consumers across the state.

Its simple economics – when companies have to compete for your business, the customer wins.

How Does It Work?

This begs the question: “Where does your energy come from now?” If there are still the old utility companies and these independent retail energy companies, how does the Texas energy market work? Thankfully, it’s fairly simple:

  1. A generation company creates electricity by processing natural gas, another fossil fuel, or possibly a renewable energy source.
  2. A retail energy supplier (like Spark) shops around for electricity at a competitive price to meet the needs of their customers.
  3. By hunting down the best rates, we pass the savings along to our customers.
  4. Your local utility is responsible for the physical distribution and delivery of energy to your home or business.
  5. You receive the same service, but at the price that’s right for you.

Ready to pay less for an energy plan that that suits your needs and lifestyle? View our rates in your area and experience the Spark difference.

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