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5 Myths about Electricity Deregulation in Texas

August 17, 2010

Since the electricity market in Texas was deregulated several years ago, residents in cities participating in this emerging competitive market have enjoyed their power to choose retail electric providers. Texas energy deregulation has been a success despite the abundance of several detractors, most of which are coming from areas and states where the implementation of energy deregulation has failed.

The following discusses some of the myths perpetrated against energy deregulation in Texas and the answers and explanations that would debunk these myths and give consumers relying on Texas electricity the real truths behind energy deregulation.

1 – Texas electric consumers in deregulated areas are paying more than regulated areas

The latest data released by the Association of Electric Companies of Texas or AECT states that this is not so. Just take this information about Dallas electricity and Houston electricity as an example where retail electric providers offering one-year fixed price plans is cheaper in comparison with 28 state cooperatives and 11 municipal utilities that don’t have locked in prices for a pre-determined period of time.

2 – The price of Texas electricity increased due to Energy Deregulation

Legislators in some states who are not eager proponents of energy deregulation are blaming this policy for the increase in electric prices. The fact is higher prices is an occurrence not only in deregulated states but on a nationwide scale as well. This is due to dramatic increases in the prices for natural gas and petroleum products which are used heavily for the generation of electricity.

What this tells consumers is that no matter how electricity is marketed – through a deregulated competitive market, cooperatives or through municipalities – the price would still be dictated by the cost of the raw materials used for generation. The only difference with an energy deregulated power market is – the freedom to make an energy choice.

3 – Texas does not have a competitive electric market

Whoever mentioned this myth doesn’t know how competitive the Texas energy market is, and is in fact the nation’s most competitive energy market with over 55 percent shared by new Texas electric companies. Residential, commercial and industrial consumers have the option to choose cheap electricity plans offered through fixed, variable and other competitive rates.

4 – Texas residents fall prey to market power abuse

In energy deregulated energy markets such as in Dallas, Houston and other Texas cities, the term “market power” simply does not exist. People who have the power to choose could not be forced by Texas electric companies to purchase electricity from them. Residents can switch to any provider they want as long as they do not have pending account abilities with their existing providers.

5 – Electricity is a prime commodity that should not be deregulated

Electricity can be compared with an analogy to food, another vital commodity that consumers simply could not live without. In a country like the United States, the food market has considerably very intense market competition all along its supply chain: starting from the production and raw materials, to the final product packaging and form that is served on every American’s dining table.

This competition resulted in greater abundance for food which can later be translated to very cheap retail prices. The same would be true for electricity, wherein competition among retail electric providers not only placed the prices of Texas electricity in check but have also resulted in higher levels of customer service never been enjoyed by consumers in a regulated and monopoly-controlled power market.

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