Chapter 9 - Electric industry deregulation and competitive markets

Abstract

Among the most important energy sector innovations of the Texas experience is that of the restructuring of the electric industry. The Texas electric sector changed from a traditional regulated rate-of-return model to a three-part structural paradigm including (1) a competitive generation market, (2) a regulated rate-of-return transmission and distribution sector, and (3) a competitive market for retail service. The set of innovations, including legislative initiatives, public agency structural transitions, policy guidance, industry business model changes, consumer adaptation to change, and a set of accommodating technological developments took place over a period of about 10 years from 1995 to 2005. The Texas restructured electric market has been the only US experience with a successful energy-only market design—but coops and municipal systems were left unchanged. The result is that the Texas provides an ongoing experiment with competitive versus traditionally regulated electric systems producing results of price, reliability, and consumer satisfaction throughout the State. The impacts of this grand experiment will continue to provide benefits for future deregulation guidance—yet another of Texas energy sector leadership that benefits the US and global markets.