Why did Texas Deregulate its Energy?

Texas’ energy market has been deregulated for over ten years, as a result of Texas Senate Bill 7. This bill deregulated the market over a period of several years, and has attracted its share of supporters and critics. Praise and detraction aside, why was Texas Senate Bill 7 put into place? What caused Texas’ deregulation?

For starters, it’s important to look at Texas’ market before the bill. Texas has an enormous electrical demand– if it was an independent nation, it would have the 11th highest demand in the world. This means that electrical companies, like those found at www.electricitycompaniestexas.com/, would have an enormous potential customer base to compete for, provided they had the impetus to do so.

The aim of deregulation was to create an environment that would allow customers to choose their electrical provider, which would lower costs for consumers by forcing electrical compete to compete based on price. Competition within the market would also allow the companies with the best service and most reasonable prices to grow and expand their service areas, further helping Texans have access to power without paying exorbitant rates. On the whole, Texas’ deregulation reads like a measure to help break up energy monopolies and inject some healthy competition into the marketplace. Studies show that the cheapest offers on the market now are priced less expensively than they would have been prior to deregulation.

While this vision offers some compelling arguments in favor of deregulation, the reality hasn’t always been so rosy. While many people and Texan energy manufacturers have been able to enjoy lower prices, data compiled by the U.S. Energy Information Administration shows that Texas’ energy prices were 17 higher than the national average in 2009. The Texas Coalition for Affordable Power argues that typical consumers paid as much as 3,000 in extra costs in the decade following deregulation, for a cumulative cost of 11 billion.

Financial setbacks have also prevented electricity manufacturers from being able to keep up with Texas’ need for energy, further influencing price and distribution concerns as they scramble to keep up with demand.

Texas’ reasoning behind deregulating their energy market is fairly simple– it would theoretically help lower prices for consumers. Unfortunately, the debate about whether or not deregulation has actually benefited Texas continues.

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