Texas electricity deregulation, explained

Before 2002 a Houston household or business bought electricity from one company that generated it, delivered it and billed for it. Senate Bill 7 broke that company into pieces and opened one piece to competition.

The three roles

• Generators build and run power plants and sell into the wholesale market. You have no direct relationship with them.
• Transmission and distribution utilities — CenterPoint in Houston — own the wires and the meter, deliver the power and restore outages. They remain regulated monopolies and you cannot choose yours.
• Retail electric providers buy wholesale power, package it into plans, sell it and bill you. This is the competitive layer, and this is the only part you choose.

Sitting over all of it, ERCOT operates the grid and the wholesale market, and the Public Utility Commission of Texas regulates the utilities and licenses the retail providers.

What competition actually shifted onto you

Deregulation is usually described as giving customers choice. It is more accurate to say it moved a decision from the utility to you. Before, someone else decided what you paid and a regulator reviewed it. Now you decide, and the quality of that decision determines your price.

That has a real consequence: the gap between an actively managed account and a neglected one is substantial and it compounds. A business that shops every renewal and a business that has not looked since 2018 are paying quite different prices for identical power delivered over identical wires.

Who was left out

SB 7 did not compel municipal utilities or electric cooperatives to open. Most did not. So:

• Austin (Austin Energy) and San Antonio (CPS Energy) have no retail choice.
• Most rural cooperative territories have no retail choice.
• Entergy Texas, serving parts of southeast Texas including Conroe, is regulated and has none.
• El Paso and parts of east Texas sit outside ERCOT entirely and are separately regulated.
• Lubbock Power & Light is the counter-example — a municipal utility that voluntarily entered retail choice.

This matters locally because the Houston metro's northern edge crosses one of those boundaries. Move a few miles up I-45 from The Woodlands and retail choice can simply stop existing.

The consumer protections that exist

The PUC requires providers to publish a standardised Electricity Facts Label for every plan, provides a complaint process, sets rules on disconnection and deposits, gives residential customers a three-day cancellation window after enrolling, and designates Providers of Last Resort so service continues if a provider fails.

These are meaningful and they are also thin. They ensure the information is disclosed; they do not ensure it is understood. Every misleading plan structure in this market is fully disclosed on a document almost nobody reads.

Winter Storm Uri

In February 2021 ERCOT came close to grid collapse, wholesale prices sat at the market cap for days, and customers on wholesale-indexed residential products received bills of a size the market had never contemplated. The response included rule changes restricting how wholesale-indexed products can be sold to households, alongside broader work on winterisation and reserves.

For a business, the lasting lesson is about structure rather than politics: an unhedged position is exposed to events with no ceiling, and that exposure should be a deliberate choice rather than the result of a contract nobody read. Fixed, index and the honest version of that trade-off.