In Texas the deregulated market for electric service was a happy development for many people that remember the days of driving to the their local monopoly to pay their electric bill. Many people on tight budgets waited until the last minute to pay their light bill, their water bill, rent, and the many bills families have to budget for. To top off a bad experience with your monopoly energy provider a large electric deposit was usually asked for to begin your electric service.

The monopoly electric provider became an enemy in many low-income families collective conscious because they could not negotiate a better price. Families were stuck paying the price dictated by the only company in town and it felt unfair. Even if the electric rates were reasonable and according to market forces it was still seen as one more large ugly monopoly that demanded their money. Many times one could say a judgment like this was unfair but when you have little money to work with it can be hard not to see the monopoly as goliath.

Not everyone who hated the monopoly electric company were low-income families. Many people who made good money but were living paycheck to paycheck also did not like that the price for their electric service was non-negotiable. People like a few options but the electric company did not provide any solution to this dilemma. The one choice for electric service also often wanted very large electric service deposits. When Texas deregulated the electricity market it opened up competition and allowed several retail electric providers into the competitive landscape.

The strange aspect to a deregulated electric market is that the monopoly electric provider was also the one generating the electricity using coal fired power plants, natural gas plants, hydro, and some nuclear plants. The question arises as to how there could be more companies in the market if the energy generation is already in place to provide adequate supply? If more electric companies come into existence what are they doing? Are they buying these generation plants to compete against the prior monopoly? Buying up those generation plants is not needed as the paper trading that needs to take place is a very important aspect of selling retail electric service. Full fledged electric companies can exist and create efficiencies in the energy market just through the buying and selling of wholesale electricity. Once the wholesale electric service is bought if the company executes their business plan well they can sell retail electric service to homes and businesses throughout Texas.

Retail electric companies are like farmers who also need to hedge their energy purchases and manage it in a way that they can sell individual portions from the larger whole. A farmer will lock in their food production using the futures market so they are guaranteed to be able to sell it at a price that will make them a profit. They don’t want their expenses to outweigh their potential profits. Retail electric providers basically buy their energy from these power generation plants at a certain price and hedge their purchase using the futures market. They can lock in natural gas prices at certain price points during the year to maintain a good profit and hedge against risk. The providers can also lock in “heat rate” which is the cost to generate electricity and this can help decrease risk and give them a guaranteed profit.

The retail provider then sells this energy to customers throughout the year and the provider in turn can sell excess energy back on the nodal market as they need to. When the provider needs more energy they can purchase the energy on the open market when prices are advantageous to do so. In the early years of the Texas deregulated energy market a map was created to show where in Texas counties had opted into the deregulated Texas energy market. These counties were shown and made available publicly so consumers could see just how many Texans had decided to go with a competitive electric service market. This research and created interactive map was produced by with the data provided off of the Public Utility Commission of Texas website:

The use of interactive tools like the deregulated energy map and electric rates and plans shown in online comparison charts allowed for people to see their options and make a valuable choice. The website further enhanced the Texas energy consumer experience by developing a place where customers could leave valuable user feedback about their experience with the electric provider they chose. A comment section was available on the website for people to give their opinion on the electric company they ordered service through. These energy consumer reviews and ratings for the many Texas electric companies allowed people to make,

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