Texas Electricity Deregulation Explained

What Is Electricity Deregulation?

Electricity deregulation means the state separated the business of generating and selling electricity from the business of delivering it. Before 2002, most Texans got their power from a single utility that handled everything. Today, dozens of companies compete to sell you electricity while your local delivery company keeps the lights on.

The idea is simple: competition drives better prices and more choices. Instead of one company setting the rate, Retail Electric Providers (REPs) compete for your business with different plan types, contract lengths, and pricing structures.

How Senate Bill 7 Changed Everything

In 1999, the Texas Legislature passed Senate Bill 7, which restructured the electricity market. The law took effect on January 1, 2002, and it did three things:

1. Broke up the old monopolies. The big utilities were split into separate generation, transmission, and retail companies.
2. Created a competitive retail market. New companies could enter the market and sell electricity directly to homes and businesses.
3. Established consumer protections. The Public Utility Commission of Texas (PUCT) oversees the market and enforces rules that protect customers.

The result is a market where more than 100 REPs offer hundreds of plans across deregulated areas.

Deregulated vs. Regulated: What Is the Difference?

In deregulated areas, you pick your REP and your plan. Your local TDU still delivers the electricity, maintains power lines, and responds to outages. About 85% of Texans live in these areas, including Houston, Dallas, Fort Worth, and most of the state’s major metros.

In regulated areas, a single utility handles everything. You cannot choose your provider. This includes cities like Austin (served by Austin Energy), San Antonio (served by CPS Energy), and areas served by electric cooperatives in rural parts of the state.

Which Areas Have a Choice?

If your home is in the service territory of one of these TDUs, you are in a deregulated area:

• Oncor — serves the Dallas-Fort Worth metroplex, Waco, Midland-Odessa, and surrounding areas
• CenterPoint Energy — serves the greater Houston area
• AEP Texas — serves Corpus Christi, McAllen, Laredo, and parts of West Texas
• Texas-New Mexico Power (TNMP) — serves scattered areas across the state, including parts of the Houston suburbs and Central Texas

Not sure which TDU serves your address? Enter your ZIP code on ChooseMyPower to find out instantly.

Why Deregulation Matters for Your Wallet

Competition means you are not stuck with one price. Depending on how much electricity your home needs, the right plan could save you hundreds of dollars a year. Fixed-rate plans lock in a price per kilowatt-hour (kWh) for 6 to 36 months. Variable plans change month to month. Some plans reward you for keeping your monthly kWh in a certain range.

The key is comparing plans based on the Electricity Facts Label (EFL), which every REP is required to publish. The EFL shows you the all-in price at 500, 1,000, and 2,000 kWh so you can compare apples to apples.

The Bottom Line

Texas electricity deregulation gives most Texans the ability to pick a plan that fits their home and budget. The delivery of your power stays the same no matter which provider you choose. The only thing that changes is who you pay and how much.