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Retail Electric Choice: What Is It And How Does It Affect You?

Tired of spending hours trying to learn about concepts like retail electric choice?

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Trying to find a cheaper option?

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This guide will walk you through everything you need to know about retail electric choice in Texas, why it affects you, and how you can use it to your advantage.

What Is Retail Electric Choice?

Retail electric choice is basically a long-winded term for deregulation.

Deregulation of electricity is essentially the unbundling of large, investor-owned utility companies who, historically, control all three aspects of the electricity market:

• Generation
• Transmission
• Distribution

Does the term “deregulation” not ring any bells? We’ll break it down for you.

If you’re already familiar, don’t worry, we promise to keep it brief.

Deregulation in Texas was introduced via the passing of Senate Bill 7 back in 2002.

The bill restructured the electricity market, making it so that large investor-owned utilities (IOUs), who previously predominantly provided electricity service to Texans, were faced with little competition.

Enter Retail Electric Providers (REPs).

Before deregulation, large IOUs held a monopoly in the market, and it led to a bit of chaos, including:

• Price-gouging
• Duplicate distribution systems
• Large blackouts

Now, due to deregulation, the IOUs still generate electricity, but it is then sold to REPs across Texas, who compete for your business and ultimately sell it to you.

Retail choice of electricity is a big win for you as an energy consumer.

It gives you the ability to:

• Shop for the best electricity rate in your area
• Compare different REPs
• Choose a plan based on your specific energy needs
• Take advantage of incentivized offers
• Switch providers and plans at any time
• Most importantly, save money

Deregulation allows Retail Electricity Providers (REPs) to offer various rates, plan types, and different levels of flexibility to consumers like you.

Now, instead of being told who you have to do business with, you have the chance to choose for yourself.

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Which States Have Retail Electric Choice?

A number of states in the U.S. are like Texas.

No, not the great barbecue or the palpable state pride, but alike because they, too, are deregulated.

There are a number of other states with retail electric choices. A few others have deregulated natural gas programs, and some have one but not the other.

A handful has what is called “partial choice” or “limited choice.”

Even fewer have both deregulated electricity and natural gas markets.

Take a look at the following:

• California
  • Electricity: Yes, but limited
  • Gas: Yes
• Georgia
  • Electricity: Yes
  • Gas: Yes, with limitations
• Texas
  • Electricity: Yes
  • Gas: No
• Massachusetts
  • Electricity: Yes
  • Gas: Yes
• Oregon
  • Electricity: Yes
  • Gas: No

Maine, Maryland, and Michigan all have deregulated electricity and natural gas markets.

Minnesota and Mississippi, meanwhile, have no choice in either.

There are currently 17 states and 1 district with a deregulated electricity market.

They are:

• California
• Connecticut
• The District of Columbia
• Delaware
• Illinois
• Massachusetts
• Maryland
• Maine
• Michigan
• Montana
• New Hampshire
• New Jersey
• New York
• Ohio
• Pennsylvania
• Rhode Island
• Texas

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Where Does Retail Electric Choice Exist In Texas?

There are six Transmission and Delivery Utility (TDU) companies servicing the areas of Texas that have a retail electric choices (the deregulated markets):

• Texas-New Mexico Power Company (TNMP)
• Sharyland Utilities
• AEP North
• AEP Central
• Oncor
• CenterPoint (Houston and surrounding areas)

Most Texas cities have a retail electric choice, but there are some cities and areas in Texas that do not.

The good thing is, three of the largest cities in Texas are deregulated:

• Houston
• Dallas
• Fort Worth

When lawmakers deregulated electricity in Texas in 2002, it allowed cities such as San Antonio, Austin, San Marcos, and El Paso — as well as areas served by electric cooperatives — to remain regulated markets with a single provider.

It’s important to note that the regulated areas of Texas account for only about 25% of the land area of Texas. The remaining 75% of the state is deregulated.

What Retail Electric Choice Means For You

But what does that actually mean for you?

In short, retail electric choice means that you have the freedom to choose which REP you want to provide electricity to your Texas home or business.

But, it also has some other perks.

Deregulation:

• Reduces generation costs and customer prices
• Allows you to choose from multiple energy providers based on what rate and plan best fit your unique energy needs

Pretty sweet, right?

Let’s take a look at how retail electric choice has affected José and Emily:

José currently lives in Dallas, and Emily lives in Austin. The two recently got engaged and decided José would make the move to Austin.

When José lived in Dallas, he chose a REP that offered a free nights and weekends electricity plan.

This worked well with José’s lifestyle since he often spent a lot of time FaceTiming Emily after work and hosting get-togethers when Emily was in town every other weekend.

Recently, they have been researching neighborhoods and different houses in Austin, so José thought he would start looking into his options for their new REP.

After all, that’s one of the perks of retail electric choice, right?

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Unfortunately, not in this case.

Austin isn’t a deregulated Texas city, so José and Emily don’t have a choice about who they want to provide their electricity.

So, how do deregulated areas work? We’ll explain in the next section.

How Do Areas That Don’t Have Retail Electric Choice Manage Electricity?

Unfortunately, not all Texas residents are able to benefit from deregulation.

Consumers who live in areas of Texas that are served by investor-owned utilities outside of ERCOT management are not eligible to participate in retail electric choice.

On top of that, municipal and cooperative utility companies (meaning not investor-owned) can opt out of the retail electric choice program in Texas.

Consumers living in these areas don’t have the freedom to choose their electric provider.

So what do they do?

Let’s look at José and Emily again:

Remember, Austin is a regulated city, meaning José and Emily don’t have the option to choose what company they want to buy their electricity from.

Austin Energy has been operating for nearly 125 years.

Because they are a public-owned utility company, they are exempt from deregulation. Austin Energy is the sole electricity provider in the Austin area.

Because there is no electric choice available in Austin, José and Emily and their fellow Austinites must purchase their electricity directly from Austin Energy.

The Austin City Council sets rates and terms and conditions of service.

Rates for all Austin Energy residential electric customers are currently (as of April 2020) set at 7.814 cents/kWh for usage above 1,000 kWh.

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What Is A Retail Electric Provider?

A Retail Electric Provider (REP) sells electric energy to retail customers in the areas of Texas where the sale of electricity is open to retail competition (thanks to retail electric choice).

A REP buys wholesale electricity, delivery service, and related services.

They then price that electricity for customers, and because the electricity market is so competitive, they market that electricity to customers, often using promotional incentives.

You, as the customer, then complete the cycle when you sign up for and buy electricity from the REP.

How Retail Electric Providers Operate

A REP has many responsibilities, including:

• Buying electricity at wholesale
• Buying delivery service
• Paying the charges for transmission and distribution service to the TDU
• Serving as the direct contact with the customer for any electric service issues
• Billing the customer
• And more

Your monthly bill can be broken up into two sections:

• The transmission and distribution (T&D) of electricity
• And the actual supply of electricity

T&D charges cover the maintenance and upgrading of the poles and wires that bring electricity to your home or business, while the supply portion of your bill covers the actual energy you buy and use.

Depending on where you live in Texas, you may still receive just one bill from your utility or two separate bills, one for T&D from your utility and one for supply from your REP.

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How Retail Electric Providers Get Electricity

If you live in an area of Texas with a retail electric choice, it means you can get your energy supplied by a REP rather than the utility.

If you take advantage of retail electric choice, your chosen REP, rather than the utility, is responsible for buying electricity from power plants and getting it to your utility.

The utility will handle all other services like distribution and maintenance.

Electric power transmission is the bulk movement of electrical energy from a generating site, such as a power plant, to local utilities.

The interconnected lines that make this happen are called a transmission networks. The transmission lines carry high voltages, which are too dangerous to use in your home.

Once the high voltage electricity reaches the utility, it is converted to a lower, safer voltage to make it okay to use in homes like yours.

The utility transports this lower voltage electricity to homes through distribution lines, which travel shorter distances than transmission lines.

How Retail Electric Providers Sell Electricity to Consumers

REPs often compete for customers by offering:

• More choices
• Lower prices
• Quality customer service

In 2012, a J.D. Power study found that Texas customers in competitive markets are increasingly more satisfied than those who don’t have retail electric choices.

Texas Retail Choice: How To Choose the Best Retail Electric Provider

Think about all the times you ask the people closest to you for advice — It doesn’t have to be for anything big.

1. When trying a new restaurant, you may ask, “What are you ordering?”
2. Or, at the nail salon, you could turn to a friend and say, “What color are you getting?”
3. Or, at the hardware store, you ask an employee, “What do you think of this product?”

You might be thinking of doing the same when choosing an REP.

To research REPs in your area, you could:

• Ask neighbors, friends, and family who they use
• Pull out your cell phone and dial up REP after REP after REP
• Use third-party websites to search
• Check reviews for all the different REPs on social media

You have many choices when you pick which electric company to work with.

And you have almost as many choices when deciding how to choose the best REP in your area.

But here’s the secret:

The key to finding the right retail electric provider for you is knowing that “the best” REP (or even plan/rate for that matter) will depend on you and your family’s specific circumstances and unique energy needs.

In order to narrow the options down to one electric company, you ultimately have two choices: the hard way or the easy way.

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Option 1: Use All Of Your Free Time Manually Researching Available Providers

Your time is valuable.

And doing a manual search can quickly take up a lot of your spare time.

Chances are, you’ll find yourself frustrated, exhausted, and confused.

If you’re trying to find the “best” REP manually, be prepared to:

• Spend hours looking up rates
• Make a complete list of all the available REPs and plans
• Compare all of the different plans (there will be a lot)
• Start from the beginning if you can’t get this done quickly because the rates can change every 15 minutes.

Compile A Complete List Of Electricity Plans Offered By The REPs In Your Area

Got your coffee by your side?

Start by Googling all of the available REPs in your area. There could be tens of different options available (thanks, retail electric choice).

To find and compile a list of all of the plans they each offer, you can:

• Call each of them individually and be prepared to take quick, copious notes
• Go directly to their website and write down all the plans keeping in mind each of their contract lengths, kWh rates, any perks, fees, or minimum or maximum usage stipulations.

Determine Your Electricity Needs

This might be the most important part of your search.

It will help you narrow down and ultimately decide which REP and plan best fits your unique energy needs.

In order to truly find the REP that will save you, your family or your business money in the long run, you’ll need to keep these factors in mind:

• The size of your home
• The age of your home
• The style of your home
• How much time you spend at home
• How many people you live with
• What kind of appliances you have in your home
• And much more

You need to look at the specific ways you and your family or business use electricity to choose the type of plan that will meet your needs.

Compare Each and Every Plan Available To Match To Your Electricity Needs

Once you have determined your unique answers to the factors above, you are prepared to compare every single plan available to you.

But how?

Unless you enlist your whole family to help compare every aspect of a plan (i.e. your rate per kWh, contract length, any bonuses that come with the plans, fees, and more), you are likely not going to be able to settle on the right plan before the rates change again.

And are you sure that picking a REP and plan is something you want to just take a guess on?

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The type of plan you choose will affect:

• Your rate per kWh
• Any deposit you may owe
• Your contract terms
• Any additional fees you may have to pay

Seems like a pretty big decision.

Pick A Plan, Enroll, and Monitor The Market For The Rest Of Your Life

Let’s say you do choose a plan.

Chances are, it’s probably not the best for you simply because there are so many factors to consider that it is not humanly possible.

Unless you plan to designate one Saturday every month for electricity research, this option just isn’t sustainable.

Having a retail electric choice is a great thing for you as a consumer.

Don’t let the manual research ruin that for you.

Let us free up your Saturdays.

Option 2: Save Time (and A Headache) and Find The Best Plan For You With Unbiased Technology

The manual way to search for, find, and sign up with a REP is time-consuming.

It’s confusing, annoying, and downright frustrating and exhausting.

Feeling overwhelmed? We don’t blame you.

When you’re ready to put away your extensive list and pull out a celebratory cocktail (because the work is done), let us introduce you to Power Wizard’s Shopping Tool.

All you have to do is enter:

• Your zip-code
• The size of your home
• A few other relevant pieces of information

Power Wizard’s Shopping Tool will compare all of the plans available in your area and give you the best overall option.

The best part? It takes less than five minutes.

It doesn’t even stop there.

Being a Power Wizard member means that not only will we find a great plan for you, but we’ll also:

• Manage the entire enrollment process
• Take care of your switch from one REP to another
• Continually monitor your usage and the market
• Let you know if a better plan that saves you money becomes available and help you switch again

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How To Change Electric Companies In Texas

You’ll need to:

• See what the penalty is for switching
• Check and see if you are in a contract with your current provider

A lot of the time, after your initial contract is up, electricity providers will automatically switch customers over to a month-to-month plan.

If the penalty is only $25, it might be in your best interest to switch plans if you anticipate saving $10 per month.

Now, you can use your retail electric choice and start to shop around for another plan and rate.

But if you think the process of changing electric companies in Texas is any easier than researching for and signing up for one, you’d be sorely mistaken.

The good news is that Power Wizard continues to do all the work for you.

Power Wizard uses its unbiased algorithm to monitor your electricity usage and all of the electricity plans that are on or that come onto the market 24 hours a day.

If your electricity usage changes, or if a better plan comes on the market that better fits your needs, Power Wizard lets you know and helps you switch plans.

Power Wizard ensures that you always have the plan that best fits your energy needs.

Complete List of Cities in Texas with Retail Electric Choice