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The Texas Electricity Deregulation History: What Texans Should Know

Powerlines standing in a field beneath a light blue sky with clouds.

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Reading Time: 6 minutes

It’s important to understand the history of Texas electricity deregulation. By introducing competitive pricing, legislators hoped to prevent unexpected price hikes. However, the implementation of Texas electricity deregulation has led to pros and cons for consumers.

This information sets the backdrop for the massive power outages following winter storm Uri in February 2021. Some detractors linked the power outages to alternative energy by blaming the lack of power on frozen wind turbines. However, wind power provides a mere fraction of the Lone Star State’s winter electrical energy. We’ll wrap up with a look at how the state’s energy industry plans to recover.

What’s the History of Texas Electricity Deregulation

Here’s a timeline regarding the history of regulation and deregulation of electricity in Texas:

  • Before 1975, Texan cities regulated rates and service.
  • In 1975, the Public Utility Regulatory Act (PURA) passed in the Texas Legislature. It supposedly gave the state more power to regulate electric rates and service. In reality, cities maintained control of rates.
  • In 1978, the US Congress passed the Fuel Use Act to deal with the gas and oil crisis. The act required utilities to switch to coal and nuclear energy sources. This shift in energy sources instigated a rise in electricity rates that hasn’t abated.
  • In 1995, Bill 373 passed in the Texas Senate. It mainly impacted the Electric Reliability Council of Texas (ERCOT). Since 1970, ERCOT has managed the electric grid that supplies energy to most Texans. Bill 373 required utilities to allow independent energy providers transmission capabilities. This move would shore up a wholesale market. Consequently, the non utility wholesale market could offer market prices. Meanwhile, the utilities charged regulated rates set by the Public Utility Commission of Texas.

The first attempt at deregulation did not succeed.

  • In 1999, Senate Bill 7 provided a better solution. Bill 7 required ERCOT to build competition into the retail energy industry. Price to Beat is a catchphrase to describe the purpose of the bill. By creating competition, state leaders hoped to drive down prices without sacrificing quality. By introducing a price floor, lawmakers hope to give new companies an opportunity to get properly set up. Established electric utilities could not undercut their prices to monopolize the market.

Winter Storm Uri and Massive Power Outages in February 2020

Hundreds of Texans died during Winter Storm Uri and authorities are still unraveling what happened and how to prevent it in the future.

The findings summarized below come from a report from the Energy Institute at the University of Texas at Austin. The report appears on the Public Utility Commission of Texas website. In “The Timeline and Events of the February 2021 Texas Electric Grid Blackouts,” researchers comment on the causes of the Texas electric grid failure in February 2021 during Winter Storm Uri.

The report noted that low temperatures caused numerous outages at generation sites that resulted in customers losing power. It also stated that the power exceeded record disruptions in December 1989 and February 2011. However, Winter Storm Uri was not as severe as weather events in those years. So, why was the devastation so widespread?

The electric blackouts from February 15-18, 2021, occurred due to the following reasons:

  • Failure of generation technologies. The severe storm impacted both traditional and renewable energy generation. This includes natural gas plants, nuclear reactors, coal power plants, solar generation and wind generation.
  • Inadequate demand forecasts. ERCOT underestimated demand by 9,600 MW, or 14%.
  • Inaccurate weather forecasts failed to predict the storm’s severity.
  • Planned generator outages were within close range of the planning scenarios.
  • Rapid grid deterioration on February 15 precipitated the blackouts. Early in the storm, ERCOT had to partially cut power to prevent grid failure.

Within 24 hours culminating at noon on February 15, the electric system lost 24,600 MW. This capacity loss included 3,700 MW of wind power, 13,000 megawatts of natural gas capacity, 3,000 megawatts of coal capacity and 600 megawatts of solar capacity. There was also a slight decrease in nuclear capacity.

Reasons for Outage Listed by Power Plants

Power plants specified that weather-related issues, equipment issues, fuel limitations, transmission and substation outages, and frequency issues led to the catastrophic failure. Further, power generators inadequately prepared for winter failed to withstand the challenges of the storm.

Failures related to natural gas may the electricity shortage worse. Distribution facilities were not able to deliver the fuel needed to run electrical power plants. Frozen gas equipment and failure to communicate problems with electrical components left utility officials without critical information.

The production of dry gas fell by 85% throughout the first two weeks of February. Therefore, the failure of natural gas systems started well before the storm. In fact, reduced distribution to some natural gas users started well before the blackouts planned by ERCOT.

Part of the natural gas infrastructure folded into ERCOT’s emergency response program. At least 67 locations were part of a voluntary Emergency Response Service program (ERS). So, they would have lost power on February 15. Meanwhile, inventory was low at underground natural gas storage areas. Although ERCOT averted a catastrophic electric grid failure, it lost nearly half of its keep ability to generate power.

sidewalk view of a house during cold weather

Has the System Been Winterized or Repaired for Winter 2021/22?

According to recent news reports, no. Despite overtures of grief and determination, not much has changed since the killer blackouts of February 2021.

Millions of Texans went without power while hundreds died due to the effects of Winter Storm Uri. So far, the state has not winterized critical equipment responsible for much of the February 2021 power outages.

Gov. Greg Abbott made weatherizing equipment needed for the generation of electricity a top priority following the devastating storm. In reality, though, little has changed. Laws signed by Abbot in June 2021 targeted emergency weatherization of electricity generation equipment.

Senate Bill 3 was part of the spate of laws that came out of Uri’s effect on the electric grid. Despite the urgency expressed by the governor, the bill allows 180 days for the Railroad Commission to come up with weatherization rules.

Another sign that the law lacks teeth comes in the form of a loophole for natural gas companies. If natural gas companies don’t consider themselves part of the state’s critical infrastructure, they may not have to weatherize their equipment at all.

Proactive Texas homeowners can opt for solar power that may help alleviate their dependence on the grid. Although solar power has limitations during the winter, it provides homeowners with a backup energy source most of the year.

Pros and Cons of Deregulated Electricity

There are pros and cons to Texas electricity deregulation. The events of the Winter Storm Uri blackout attest to that. A deregulated market allows rates to decrease over time when properly managed. Since 2008, Texans have seen annual rate declines in excess of $0.08 per KWh.

Additionally, deregulated electricity allows competition designed to put downward pressure on rates. In theory, producers who provide the cheapest energy at the highest quality will win business from their competitors. In a perfect world, this would create fierce competition that would benefit consumers and force competitors to develop more efficient systems.

Texas electricity deregulation can also prevent monopolies from setting prices. It also increases the use of renewable sources.

There are also downsides to deregulation. For example, the Texas Power to Choose website receives many complaints and negative coverage over the lack of control over providers.

For example, electricity providers are supposed to provide an Electricity Fact Label (EFL) that discloses each plans rate structure. Unfortunately, providers have found loopholes around the EFL requirement. They draw customers in with teaser rates. Then, they raise the rates at a future date.

Powerlines standing up against a dark, cloudy sky.

Takeaway On the Texas Electrical Grid 

The Texas government has employed both regulation and deregulation of electricity in an attempt to introduce favorable prices for consumers. Texas electricity deregulation has both positives and negatives. At the end of the day, it’s up to Texas consumers to voice their opinion on the state of the electric grid in the Lone Star State.

Following the catastrophic storms and power outages of February 2021, Gov. Abbott signed bills into law designed to winterize critical electrical equipment. However, extended timelines and generous opt-out loopholes for the gas industry make the laws incredibly ineffective. More importantly, the lack of progress will leave millions of Texans at the whim of the elements this winter.

Looking for Other Electricity Options? We Have You Covered

If you’re nervous about the stability of the Texas grid, you’re not alone! Luckily there are options in place to make sure that everyone is taken care of this winter season. Look towards installing a whole home generator for your home to keep the lights on, even if the grid is off. We’re here to help you transition your household into having different options. Visit us online or give us a call today at 1-833-433-0331 to speak with a live representative.

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