On January 1st, 2002, the Texas Senate Bill 7, which began the process of deregulation of the Texas electricity market, went into effect. This deregulation allowed homeowners and business owners the option to choose and compare electricity rates in Houstonand many other cities in Texas. Since its inception, an estimated 40 percent of homeowners and a staggering 85 percent of business owners have switched their energy providers, saving over 1.5 billion dollars in the first year alone.
Deregulation: What Does it Mean and What Can it do for Energy Consumers?
In many areas of the country, homeowners and business owners are often required to use electricity from an incumbent provider, and are thus subjected to that particular provider’s costs. Deregulation of the electricity market essentially gives energy consumers the choice to choose their electricity provider, which means that they can potentially pay less for the energy that they consume. On top of saving customers money, deregulation in Texas has also allowed energy consumers to choose the type of energy that they use. Homeowners and business owners can now choose to continue to use traditional fossil fuels and other nonrenewable energy sources, or can easily make the switch to companies that supply wind or solar power.
How Does a Deregulated Market Work?
To allow new energy companies to enter the market without being undercut by the incumbent providers, the Texas Senate Bill 7 set the “price to beat,” which the incumbent companies could not fall below, and remained in effect until 2007. This allowed new providers, who could charge a price below the price to beat, to enter the market successfully. This ultimately resulted in these newer companies taking a hold of a larger portion of the market while still being able to offer lower prices for consumers.
With incumbent electric providers facing new competition, energy prices can no longer remain stagnant and over-priced. To successfully compete, all companies must offer fair, affordable services to their customers.
Switching Providers Saves Money
With so many new providers, finding the best electric company can be tricky, especially with the recent influx of fledgling retail electric providers. As such, brokers, consultants and numerous websites are now available to help potential consumers shop the market for the best energy prices. A free electric market means more competition for business, which ultimately passes savings on to homeowners and business owners.