In a regulated system there is one vertically-integrated utility that generates the electricity, transmits the electricity, and provides retail services to customers. The energy provider was usually a municipality, a group of investors, or an electric co-op, and the price of electricity was regulated by law.
In Texas, the wholesale market for electricity was deregulated in 1995. The retail market for electricity was later deregulated in 1999 by then, Governor of Texas, George W. Bush. We note that some utilities already in existence did not opt into the deregulated market. A deregulated system increases competition with the goal of ultimately decreasing prices. The maps shown below highlight which areas are regulated (grey map areas), and which are deregulated in both the wholesale and retail markets. The electricity market is now broken down into three general segments: 1) generation, 2) transmission, and 3) retail. In each segment companies can compete without being in any of the other segments. Additionally, retailers of electricity can buy energy from generators anywhere in the state, not just in their locality, and customers can choose between different retailers.
Results
The amount of renewable energy options available to the retail market is affected by the structure of the market. In regulated markets the public utility must build renewable generators for consumers to have access to that type of power. However, in deregulated environments, renewable generation can be added by any competing company that wishes to provide the power, and customers have the option to choose their provider. Customers make their selections for a variety of reasons, including price consciousness. Over the last decade, natural gas has seen a resurgence, because a new technology allowed it to be the most cost-effective option. When renewables are less expensive than traditional forms of energy, there will be parties in the deregulated market that will want to buy and sell electricity produced from renewable energy sources. In sum, deregulation has benefitted renewable resources, because it gave customers the ability to choose their energy provider and created a more price conscious system. Additionally, the same legislation that deregulated the market in Texas also included a renewable portfolio standard that required utilities to obtain certain amounts of power from renewable sources.
Significance
The last two and a half decades have brought giant changes to the electricity market in Texas. The plethora of variables affecting the grid, including an influx of natural gas for power generation, have made it difficult to determine whether deregulation has been a success in all facets. However, deregulation has enabled a system, that encourages growth in the renewable energy sector.
Authors
Table of Sources
Dylan Baddour, Texas’ Deregulated Electricity Market, Explained, Hou. Chron. (June 8, 2016), https://www.houstonchronicle.com/local/explainer/article/texas-electric-deregulation-ERCOT-TCAP-7971360.php
Kate Galbraith, Alternating Current, Texas Tribune (June 12, 2010), https://www.texastribune.org/2010/07/12/has-electric-deregulation-helped-or-hurt-texans/.
U.S. Electricity Grid & Markets, EPA, https://www.epa.gov/greenpower/us-electricity-grid-markets (last visited August 24, 2020).
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