Texas Electricity Deregulation: A Comprehensive Guide to How It Works

Texas is one of the few states in the United States that has deregulated its electricity market. This means that Texas residents and businesses have the power to choose their electricity provider from a variety of options. While this may seem like a complex process, it is actually quite simple.

The deregulation of the electricity market in Texas began in 2002. Prior to this, the state regulated the entire electricity market, from generation to distribution. However, with the deregulation, the market was split into three separate components: generation, transmission, and distribution. Generation refers to the production of electricity, transmission refers to the transportation of electricity over long distances, and distribution refers to the delivery of electricity to homes and businesses.

Under the deregulated system, electricity providers in Texas are responsible for the generation and sale of electricity, while transmission and distribution are handled by regulated companies. This means that Texas residents and businesses have the option to choose their electricity provider based on factors such as price, renewable energy options, and customer service. With this system in place, Texas has become a leader in renewable energy, with a high percentage of its electricity coming from wind power.


Texas electricity deregulation is a complex topic that can be difficult to understand. This section will provide a brief overview of the topic, including what it is, why it happened, and what it means for consumers.

What is Texas Electricity Deregulation?

Texas electricity deregulation refers to the process by which the state of Texas deregulated its electricity market. Prior to deregulation, the state’s electricity market was monopolized by local utility companies: HL&P, (Houston Light and Power) TXU (Dallas), CPL (Corpus Christi Light and Power), and WTU (West Texas Utilities), which controlled both the generation and distribution of electricity. Deregulation opened up the market to competition, allowing multiple companies to generate and sell electricity.

Some notable cities opted out of Texas electricity deregulation including: Austin, San Antonio, El Paso, Besumont and Lubbock.

In February, 2022, the Lubbock City Council voted in favor of electric deregulation and will begin deregulated electricity sales in 2024.

Lubbock customers will receive their final LP&L Bill in March 2024.

Under the deregulated system, consumers have the ability to choose their electricity provider and plan. This allows them to shop around for the best rates and plans, and to choose a provider that meets their individual needs.

Why was Texas Electricity Deregulated?

Texas electricity deregulation was the result of a number of factors, including a desire to increase competition and reduce prices for consumers. Proponents of deregulation argued that competition would lead to lower prices, improved service, and increased innovation.

In addition, deregulation was seen as a way to encourage investment in new power plants and other infrastructure. By allowing multiple companies to generate and sell electricity, the hope was that the market would become more efficient and responsive to consumer demand.

Overall, the goal of Texas electricity deregulation was to create a more competitive and efficient market that would benefit both consumers and businesses.

That’s it for the Overview section.

How Does It Work?

Texas electricity deregulation is a complex system that allows consumers to choose their own electricity provider. Understanding the basics of how it works can help consumers make informed decisions about their electricity plans.

Retail Electric Providers

Retail Electric Providers, or REPs, are the companies that sell electricity to consumers. There are many REPs to choose from in Texas, each with its own pricing plans and features.

Electricity Rates

Electricity rates in Texas can vary widely depending on the REP and the plan chosen. Rates are typically based on kilowatt-hour usage and may include different fees and charges.

Electricity Plans

Electricity plans in Texas can be fixed or variable. Fixed plans offer a set rate for a specific period of time, while variable plans may change based on market conditions.

Choosing a Provider

Choosing a REP can be a daunting task, but there are resources available to help consumers compare plans and rates.

Billing and Payment

Billing and payment for electricity in Texas is handled by the consumer’s chosen REP. Bills may include charges for usage, fees, and taxes.

Renewable Energy Options

Texas is a leader in renewable energy, with many REPs offering plans that include renewable energy sources such as wind and solar power. Consumers can choose plans that support renewable energy and reduce their carbon footprint.

Overall, Texas electricity deregulation offers consumers the ability to choose their own electricity provider and plan. By understanding the basics of how it works, consumers can make informed decisions and potentially save money on their electricity bills.

Benefits of Deregulation

Deregulation of the Texas electricity market has brought numerous benefits to both consumers and businesses. Here are some of the key benefits:

  • Increased competition: Deregulation has opened up the electricity market to competition, which has led to lower prices and better services. Retail electricity providers (REPs) are now competing with each other to offer the best rates and plans to consumers.

  • More choices: Consumers now have more choices when it comes to selecting their electricity provider. They can choose from a variety of plans, including fixed-rate, variable-rate, and renewable energy plans.

  • Lower prices: Deregulation has resulted in lower electricity prices for consumers. According to the Public Utility Commission of Texas, the average price of electricity in Texas has decreased by over 10% since deregulation.

  • Innovation: Deregulation has encouraged innovation in the electricity market. REPs are now offering new products and services, such as smart thermostats and energy-efficient appliances, to help consumers save money on their electricity bills.

  • Efficiency: Deregulation has made the electricity market more efficient by reducing the regulatory burden on utilities. This has allowed utilities to focus on providing reliable electricity service to consumers.

Overall, deregulation has been a positive development for the Texas electricity market. It has increased competition, lowered prices, and encouraged innovation, all of which have benefited consumers and businesses alike.

Potential Drawbacks

While Texas electricity deregulation has brought many benefits to consumers, there are also some potential drawbacks to consider.

One of the main concerns is the potential for market manipulation and price gouging by electricity providers. In a deregulated market, providers are free to set their own prices, which can lead to higher rates for consumers. Additionally, some providers may engage in deceptive practices, such as offering low introductory rates that later increase significantly.

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