Structure of electric power generation and distribution in Texas

Energy liberalization has been in place in Texas for more than 10 years already and has given people in this state and others the ability to choose their electric company or retail provider. Although the Texas consumer has gained some unique advantages through the liberalization of Texas electricity companies especially in terms of retail distribution, some people are still confused about how energy liberalization will actually work specifically on the roles of electric companies and other players in the energy market in Texas.

To better understand how energy liberalization actually works, a consumer must have a solid understanding of the roles each player plays in the energy market. In its most basic sense, energy liberalization applies only to retail providers, with the manufacturing and transportation component remaining intact and unaffected. Each of the key market components: generation, transportation, and retail — each a distinct electric company in their own right — plays a key role in ensuring that the Texas consumer can access electric power in an efficient and reliable manner.

historical perspective

During the old days of the power grid monopolies and before energy liberalization was ever implemented, one electric company provided all components of the utility from generation to transmission, distribution and finally to retail. When energy liberalization was institutionalized, it revolutionized the energy market in states like Texas and California as the system was implemented and created better competition between existing and emerging electric companies.

Energy liberalization has also paved the way for largely cheap and renewable electricity sources to enter the energy market, which has led to more choices for consumers, especially the option to choose environmentally friendly electrical energy sources.

The current structure in Texas

The following describes the currently unregulated structure of electrical power generation and distribution in Texas and among Texas electric companies:

* Power generation

These electric companies are responsible for generating electric power through various means including the use of fossil fuels, coal, biomass, hydroelectric power, natural gas, nuclear power, solar power, and wind power. Power generation is not affected by energy liberalization because these power plants produce and are sold to distributors and retail electricity providers. Texas electricity companies, particularly the country’s leading wind power generators, provide a significant portion of the power generation not only to Texas but to other parts of the United States as well.

*Transportation and distribution

Texas electrical companies responsible for transmission and distribution are called transmission/distribution service providers, or TDSP. These companies remained the same after the implementation of energy liberalization as they continued to control and maintain the electricity transmission infrastructure. TDSPs continue to be responsible when electrical lines are out of order, and will provide necessary repair and maintenance should such a possibility occur. The electricity they own can also be sold to retail providers as well as being charged a monthly maintenance service fee.

* Retail Distribution

The Texas electricity companies most directly affected by energy liberalization are retail electricity providers, or REPs. These are the entities that sell electrical service to consumers, whose accounts can be monitored through monthly electricity bills sent to them by REPs. These companies turn a particular service on or off and are responsible for communicating directly with end consumers. Energy liberalization has given rise to many retail electricity providers vying for consumer attention through discounts, price plans, incentives, renewable energy options and quality customer service.

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