How to easily understand Texas’ Deregulated Power Market
In some ways, a “Regulated” power industry is simple to deal with – they tell you how much you will pay and when your bill will arrive and you either say “okay” or you get yourself a couple of generators or a really complicated treadmill.
All jokes aside…being in a regulated power market means you’re at the mercy of the electricity provider when it comes to rates – you don’t have the power to choose even the slightest aspect of your electricity supply.
If you think the rate is too high or you’d maybe like to see more renewable energy sources, well… sorry. You don’t have many options when you’re in a regulated energy market.
What’s different about Deregulated energy in Texas?
Now, deregulation is a fine thing when it comes to increased market competition, flexibility for the consumer, and giving the consumer the power to choose when it comes to how their power will be generated, but it also means that the Texas power landscape suddenly got a whole lot more complicated!
Before, it was a simple arrangement where one company handled everything: power generation, distribution, and retailing. Now, it’s all fragmented. In Texas, power generation is handled by “these” companies; distribution (the wires and poles) is managed by “those” companies, and the Retail Electric Providers handle the reselling.
Instead of one major corporation handling “Everything Electric”, now you have to know whom to call and when:
For account and billing-related problems, you call your Retail Electric Provider.
For power outages that are affecting the neighborhood, you call your Utility
Oncor Electric Service, Centerpoint Energy, AEP, and Texas New Mexico Power. Unlike the resale end of things, you have no say in who’s handling the distribution – those areas are fixed, as you can see in this map put out by the Public Utility Commission.
For a power outage that affects your home only, you call an electrician.
Because of deregulation in Texas, power generation and sales have been completely shaken up from end to end. It’s no longer a matter of paying “the rate” – you might be on a longer-term, flat-rate contract or, most commonly, you might be on a plan where the rate varies periodically. There are three general categories of electric plans:
Fixed-rate plans – exactly what it sounds like: for the duration of your contract, you pay the same rate. If rates go higher than yours, you save money. If rates drop lower, you don’t.
- Variable-rate – a variable rate plan changes from month to month based on the cost of generating electricity. You won’t know what you’re paying until the end of the month. This can lead to a nasty surprise or a pleasant one. You won’t know until you open the envelope. The formula used to calculate the rate is crazy-complicated but it will be posted somewhere on your REP’s website or in the documentation.
- Indexed rate plans – this is a variable rate plan on steroids that is rarely available. If someone is trying to sell you an indexed rate plan, be aware that the price is tied to a commodity – usually natural gas – so prices can really jump around insanely.
Conclusion: Educate yourself and find savings and service
The best way to get into the plan that meets your needs is to educate yourself. ComparePower is here to help you understand the market and how it impacts your choice when looking for the cheapest light company for your home or business.