Lower Texas Power Prices Equal Lower Business Costs
Texas has one of the largest electricity markets in the country and incredibly ranks 11th in the world when it comes to consumption. For years the politicians in the Lone Star State had been be arguing about a solution to rising energy costs for homes and businesses. Then in 2002, the Texas Senate passed a law that called for Texas electricity deregulation.
The law allowed most power customers in Texas the power to choose their own electricity service provider from a number of REPs or Retail Electric Providers in their area. Initially, the new law was extremely popular and customers couldn’t wait to take advantage of better plans that would offer them lower rates. The numbers are actually quite astounding. From 2002, more than 85% of commercial customers in Texas have switched their energy providers at least once, while about 40% of residential customers in deregulated areas have switched.
The early evidence was auspicious as a number of new firms entered the market. It appeared as if the increased competition from energy deregulation would lower prices. In the two years after deregulation, more than 60 startup firms entered the Texas energy market. These new firms served both residential and commercial areas.
However, shortly after deregulation was embraced by customers, Texas energy prices steadily began to rise. According to one source, the average customer’s electricity bill rose by over 40% from 2002 to 2004. This left many Texans feeling cheated and there was a new campaign to repeal deregulation.
Due to all the dismay, proponents of energy deregulation tried to explain the situation as best they can. The first answer revolved around natural gas. After all, during the same time these prices increased by nearly 60%. The way they figured it was that it was still going to save Texans money in the long run.
Economist also lent credence to the claims of deregulation supporters when they maintained that increased competition would eventually lower prices as soon as energy prices stabilized. Customers remained skeptical. They felt as if they had been sold a false bill of good and that the politicians and legislators had not fulfilled their end of the bargain.
In the end, supporters and economists ended up being right. When the natural gas industry started to decline and stabilized, the electricity bills around the state began to decrease. This revelation eventually brought about a decrease of 30% by the summer of 2008 through the winter of 2009.
Many experts attribute this to the glut of natural gas in the state coupled with decreased energy demand due to the recession. Though Texas residents still have their fingers’ crossed, many in the know expect prices to continue to fall as the recession intensifies and people use less natural gas.
While everything looks sweet on the surface, it’s forcing businesses to cut prices as well. The good news is they believe that the lower electricity costs are helping them keep their businesses afloat until the economy turns around.
Author: Jerry Dyess has published articles for the Texas Energy for the past 7 years. Get more information on Texas Electricity rates.
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