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Texas: A Model for Effective Energy Deregulation

April 19, 2010

During the past few years, several states have methodically deregulated energy, ending the regulated monopolies that citizens in these various states have known for decades past. In the past, a single company provided the generation, transmission, delivery, sales, billing and customer support to consumers. With energy deregulation, the people now have the Power to Choose their energy retail providers. The promulgation of energy regulation differs from state to state in details and components but one thing is common to all and that is providing consumers an option to choose providers, resulting in unlimited competition between different companies. The state of Texas has been at the forefront of energy deregulation, providing consumers the ability to decide which Texas electric company can provide their utilities. The promulgation was aimed at creating a competitive environment among utility providers, thus providing better services or even cheap electricity and renewable energy options to the public. A Little Bit of History Senate Bill 7 was signed by then Governor George W. Bush on June 1999, which paved the way for the implementation of energy deregulation for the state of Texas during the subsequent years. The result was that consumers in the State had the option for selecting the Texas electricity provider of their choice among the various Retail Electric Providers or REPs that took form when energy deregulation was officially implemented. Even curing its first, the energy deregulation initiative in Texas was very successful and resulted in more than 680,000 customers benefitting from the more than 1.5 billion dollars in cost savings. Regulation was not limited to household consumers alone that switched to various electric companies. The initiative was also implemented by more 90% of large industrial corporations and entities, most of which have switched to various Regional Electricity Providers (REPs) providing utility services. Paving the Way According to the study performed by CAEM or the Center for the Advancement of Energy Markets, the restructuring of the electric market in the State of Texas, was the best in the United States based on the Retail Energy Deregulation (RED) Index. The RED Index acts an industry report card and rates states based on 22 identified attributes or criteria, with Texas ranking the highest among the state rankings. This is an indication that Texas has successfully implemented Energy Deregulation and has paved the way as the model for other upcoming competitive energy markets among the various states. One such example is the successful resurgence of wind energy production, boasting more than 9410 megawatts capacity towards the end of 2009, which is figure higher than what can be produced in California, Iowa and Washington combined. On top of that consumers have also proactively started making use of solar panels as well as practicing energy conservation activities. In 2005, Texas has reached its target in renewable energy way ahead of schedule by four years and is targeting for a new milestone of 10,000 megawatts — a target which was set in 2025 — but could be attainable in a shorter time with the current trend. While other states continue to shun energy deregulation, others are looking at Texas as their model for implementation, not only in the way deregulation was implemented, but in the application of renewable energy resources as well.

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