A recent report from the Department of Energy showed that on average, Texans paid less for electricity for the second straight year in a row.
According to the Houston Chronical, the overall price of electricity in Texas fell six times more than the US average during the first half of 2016. In terms of percentages, this means that Texas electricity rates dropped 6% compared to the 1% decrease the rest of the nation experienced. The average Texan electricity consumer paid only 11 cents per kWh, while the rest of the consumers living in other states paid (on average), 12.4 cents per kWh.
What is Causing Lower Electricity Rates?
Texas is one of the primary sources for natural gas production in the United States — it provides 25% of the country’s natural gas. This makes it very simple and easy for the state to access natural gas supplies. In fact, over half of the electric power generated in Texas comes from natural gas.
Another reason for the lower price of electricity in both 2015 and 2016 is related to crude oil and natural gas. Natural gas has recently taken the number one spot as the preferred fuel for electricity generation. In addition, the price of natural gas plummeted 28% in the first half of this year. It’s due to this decline in price for producers that the lower rates then trickle down to the consumer, and this is especially true for Texas.
Impacts of Deregulation in Texas
In Texas, around 85% of the state is energy deregulated. What this means is that consumers have the power to choose their Retail Electricity Provider (REP). For those unaware, an REP is a company that handles the supply of electricity, while the utility continues to support the delivery and maintenance of electricity to consumers.
In general, when consumers have access to an energy deregulated market, it generates competition between different REPs. Each want to attract and retain customers, which ensure that they offer the best rates and services to their customers. Because REPs have more flexibility when it comes to rates and changing rates, the impact on the market is more immediate. This is often not the case for regulated markets, where rates are more stagnate.
Benefits to Energy Deregulation in Texas
There are many other benefits to energy deregulation that also help to keep costs lower for consumers. These benefits aren’t necessarily exclusive to deregulated markets — some may apply to regulated markets, as well. Such benefits include:
Option to Choose
As mentioned above, the biggest benefit to energy deregulation is that the market opens to competition. If a consumer is unhappy with the supply services and rates their utility provides, or even REP, they have the option to switch to any other REP that provides service within the area.
It is important as a consumer to shop around, ask questions, and really understand the plans, products and services a REP provides. The reason for this is because thorough research in an energy deregulated market truly helps everyone to see savings on their electricity bill in the long term.
Access to New Energy Technologies
In order to remain competitive, REPs need to stay on top of the latest and greatest in energy technologies. The great part about these new types of products is that they are more energy efficient than their predecessors. The primary goal of an energy efficient product is to reduce the amount of energy that is used, which in turn benefits the consumer by lowering the costs of electricity.
Reduced Grid Pressure
Energy deregulation in Texas helped to encourage the development of the grid to ensure its reliability and sustainability. To achieve this, in 2008 the Public Utilities Commission of Texas implemented a savings target for utilities in the state of 20% load growth. To help meet this goal, the state implemented incentive programs that aimed to reduce energy costs, consumption and peak demand.
Stimulates New Investments
Implementing energy deregulation in Texas resulted in a $25 billion investment with 39,000 MW of new generation. The way the state set up this investment made sure that investors took all of the risk when selling electricity — not the customers. The result of this initial investment means that over half of the electric power generated in Texas is from natural gas. Natural gas currently translates to a cheaper source of electricity.