There are some misconceptions about energy deregulation in Texas, and most of them are a result of the ambiguity of the term “deregulation.” Many people believe that energy deregulation means the government has taken off its gloves and allowed the market to take care of itself. While deregulation allows for lots of freedoms on the part of retailers and consumers alike, the idea that there is no governmental oversight is not true.
Rather than an absence of government control, deregulation is best described as the absence of market conditions that foster a monopoly. Before deregulation, each utility company had a virtual monopoly on its service area. Today, areas that are deregulated have active competition between retail electric providers.
In Texas, the Public Utilities Commission (PUC) still has a level of control over the energy market as a whole. You may know that some areas of Texas have yet to be deregulated. That’s because the PUC has determined that the market conditions aren’t adequate for fostering competition.
Before any market in Texas is deregulated, the move has to be approved by the PUC. Likewise, in order for a retail electric provider to begin selling electricity packages in Texas, it has to submit to the rules enforced by the PUC. Retail electric providers are required to become certified and register as retailers in Texas by following PUC procedures.
Controlling the registration process of retail electric providers is just one of the ways the PUC continues to regulate the energy market within the deregulated Texas system. The PUC also oversees the actions and decisions of the Electric Reliability Council of Texas (ERCOT). ERCOT is in charge of managing the flow of electricity around 85% of the state’s grid and administering customers’ changes to new retail electric providers.
Despite being a deregulated market in name, energy in Texas is still regulated in some regards by government and other institutions. Some form of oversight is necessary to ensure a safe, effective and competitive energy market. Deregulation does allow Texans the power to choose where they purchase their energy supply.
Regulation within a deregulated market also allows consumers to have a clear path of recourse if they are taken advantage of by a retail provider or utility company. The right mixture of regulation and freedom is what gives Texans the power to choose their electricity provider.