The Texas Senate passed Bill 373 in 1995, outlining numerous changes to the electricity market in the state. This would mainly impact the Electric Reliability Council of Texas or ERCOT. ERCOT is the organisation that has the responsibility of maintaining the flow of electricity, as well as managing utilities for customers living in Texas and have been doing so since 1970.
Electricity in Texas is generated by over 650 different power plants, all owned by numerous companies. Once power is generated from these power plants, five major utilities have the task of delivering the electricity to consumers through 46,500 miles of transmission lines.
Thanks to deregulation, five in six consumers in the state of Texas have the option of choosing their retail energy supplier. However, there have been mixed results. There have been many consumers that have taken advantage of deregulation, saving money on their energy bills.
On the other hand, plenty of customers have been left worse off, having to fork out for higher energy prices. On average, due to deregulated markets, consumers in Texas have been paying higher average prices than consumers living in regulated areas.
There have been reports that from 2002, all the way to 2016, consumers in Texas could have saved up to $27 billion if they had stayed on the same rates as customers living in the regulated parts of Texas. In 2012, cities such as San Antonio and Austin paid $288 less than consumers in the deregulated areas. Reforms were later made to increase market efficiency.
The focus of deregulated energy markets is to create lower prices for consumers, but the impact in the four years post-deregulation increased the residential rate for electricity seven times, with electricity bills as high as $450 for one day of use.
Also, there have been issues with power on the grid. With extreme conditions across the state, the amount of surplus power the grid can count on has been in question, with rates falling to under 10 per cent. This has come after a natural gas plant and three coal-fired power plants were all forced to close down.
Conditions like these can impact the price of wholesale gas incredibly, with places seeing prices soar by 10,000 per cent after the North American winter storm in February 2021.
Peak demand in Texas reached 71,444 MW in July, however, reserves of power were roughly at 2,000 MW, numbers that are very close to a catastrophe hitting. With Texas labelled as the nation’s leading energy-producing state, you’d think these troubles would be far away.
Texas is the biggest producer of electricity generation from wind in the United States, as well as placing 5th across the country in electricity generation from solar sources.
More than 26 million consumers in Texas have the option of picking an electricity supplier, making the state the largest deregulated electric sector in the United States. A little over 90% of the population in Texas can choose their electricity provider.
So, what about the electricity prices for households and businesses in Texas? Well, despite all the news about high prices, the average Texas residential electricity rate is actually 15% lower than the national average, at 11.75 ¢/kWh. For October 2021, the commercial electricity rate is 30% lower than the national average at 8.09 ¢/kWh.