| Why is Texas the Model for Energy Deregulation? | | | | shining. A University of Texas study found the state |
| At the end of 1999, Texas and 22 other states had | | | | could generate up to 123,000 new jobs by moving |
| begun deregulating their electrical utilities. Since that | | | | aggressively toward solar power panel manufacturing |
| time, Texas has successfully transformed from a | | | | and installation. Several groups are already lobbying |
| typical state-regulated electric utility system to one | | | | the governor to aim for a plan to generate 1,000 |
| that is 75% deregulated, allowing the bulk of its | | | | MW of solar power by 2015 and 5,000 MW by 2025. |
| population to choose both their electrical service | | | | In March, 2010, the Texas State Energy |
| provider and a service plan that suits their lifestyle. | | | | Conservation Office awarded the City of San |
| While only a handful of states have experienced | | | | Antonio, the University of Texas at San Antonio and |
| problems implementing their versions of deregulation, | | | | St. Philip's College some $3.7 million in grants to invest |
| all have regarded Texas as the model to follow. | | | | in new solar distributed energy generation capacity. |
| Why? Texas is the number one energy user in the | | | | This will triple the amount of the area's solar power |
| country. Texas produces and consumes more | | | | generating capacity to 600 kilowatt (KW). Finally, |
| electricity than any other state. And in spite of the | | | | design improvements by two Texas companies, |
| sheer volume required to power up the state every | | | | Exeltech and Entech Solar, both of Fort Worth, will |
| day, Texas has made its deregulated electrical | | | | make solar electric panels even easier to install on |
| market succeed. | | | | consumers' roofs. |
| Ten years ago, Texas faced many of the same | | | | The third reason deregulation succeeded has been |
| problems as the rest of the country under the | | | | the transformation of the Texas electrical grid. |
| regulated electricity system. The industry had | | | | Operation of the Texas grid has changed to |
| stagnated, few power infrastructure improvements | | | | maximize its efficiency and increase reliability. Neither |
| were being performed by the utilities to improve their | | | | had gotten off the drawing board during the |
| efficiency in producing, transmitting, and metering | | | | regulated years. In fact, one hold over from those |
| electricity. Building new generation plants was often a | | | | days is that the Texas grid is largely disconnected |
| slow, bureaucratic process because the utilities had to | | | | from the rest of the country and presents significant |
| negotiate with state regulators both how to build | | | | challenges supplying power to the grids of both |
| new generation facilities and how to pass the | | | | Texas and the rest of the country. In spite of this, |
| expense on to consumers. Developments in green | | | | electric Transmission and Distribution Utilities (TDUs) |
| energy were under-funded and seldom progressed | | | | have succeeded in lowering transmission costs, both |
| beyond the experimental stage. The utilities also had | | | | in terms of getting power to market and in reducing |
| little incentive to improve service or innovate with | | | | consumer energy waste. |
| emerging technologies because they had a monopoly: | | | | In 2008, the Public Utilities Commission of Texas |
| they were guaranteed a profit that pleased their | | | | (PUCT) set energy savings targets at 20% of load |
| stakeholders. | | | | growth for Texas utilities in 2009. This means that if |
| Throughout the country, however, more and more | | | | the increased demand measured 10 MW, Texas |
| people demanded more and more electrical power. | | | | utilities had to save 2 MW through efficiency |
| Already the second largest population in America, | | | | measures. To meet these goals, the TDUs administer |
| Texas is still among the fastest growing states and is | | | | incentive programs while Retail Electric Providers and |
| expected to have 50 million by 2040. Houston, Dallas, | | | | energy efficiency service providers implement the |
| and San Antonio are among the top 10 populated | | | | programs. The programs are open to all customers |
| metropolitan areas in the country. The Austin area | | | | and have the goal to reduce system peak demand, |
| alone is expected to balloon to five times the current | | | | energy consumption and/or energy costs. |
| population over the next 30 years. | | | | TDUs pay incentives or rebates to program |
| Texas is also the second largest economy in the | | | | participants for the installation of high efficiency |
| United States (15th globally), with an annual output of | | | | equipment that produces measurable and verifiable |
| over one trillion dollars. Unfortunately, Texas also | | | | demand savings (see TDUs do not pay incentives |
| emits 10% of total U.S. "greenhouse gases". | | | | directly to residential customers. Residential |
| Growing concerns about climate change and the | | | | participants instead must go through a third-party |
| environment drove both state and federal | | | | sponsor for energy efficiency measures installed in |
| governments to pass mandates for developing new | | | | their homes. Non-residential participants can act as |
| green alternative energies. ERCOT has estimated | | | | self-sponsors and be paid directly for energy |
| that peak demand for Texas electricity increased at | | | | efficiency measures installed in their facilities or go |
| an annual rate of 2.5% from 1990 to 2006 and will | | | | through a third party. |
| experience similarly high annual growth, requiring | | | | The programs have been very successful. Between |
| between 60,000 and 80,000 megawatts (MW) of | | | | 1999 and 2006, energy efficiency programs have |
| new electricity generation capacity by 2030. | | | | reduced peak demand by 756,000 kW and saved |
| State regulators, as well as industry experts, quickly | | | | 2,005 million kilowatt hour (kWh) per year. Texas |
| realized that the regulated electric utility system | | | | utilities reported efficiency program savings of |
| lacked the agility to meet the needs of the 21st | | | | 457,808 megawatt hours (mWh) in 2007. |
| century. | | | | Wind power is cheap only if you can get it to |
| Why Did Texas Succeed? | | | | market. In February, 2009, the PUCT assigned |
| There are four reasons why the deregulated utility | | | | approximately $5 billion of transmission projects to be |
| market succeeded in Texas. The first is that | | | | constructed in Texas' Competitive Renewable Energy |
| deregulation stimulated new investment in electrical | | | | Zones (CREZ). The CREZ power-line projects |
| generation to meet demand and add reliability. Where | | | | represents one of the largest power transmission |
| power companies once had to petition the state | | | | improvement projects in the state's history. New |
| regulators for permission, they now build facilities | | | | transmission lines will be in service within four or five |
| when they see the potential for profit. In Texas, this | | | | years, eventually transmitting 18,456 MW of wind |
| led to an investment of over $25 billion in 39,000 MW | | | | generated power from West Texas to the |
| of new generation and ensured that investors, not | | | | power-hungry metropolitan areas of the state. |
| consumers, took the risk on the sale of all of that | | | | The final reason for success is that deregulation |
| electricity. Most of this investment was in | | | | dismantled the monopolies and introduced market |
| low-polluting natural gas-powered generation plants. | | | | competition. After all, a reliable and growing electricity |
| Today, over half of Texas' electric power comes | | | | system is all about managing supply and demand. So, |
| from natural gas. Texas produces 25% of the | | | | instead of one company making power, transmitting |
| nation's natural gas and is the largest producer; | | | | power, and billing you for the power in a |
| storing and supplying natural gas via pipeline for all | | | | one-size-fits-all format, the electricity market |
| regions of the country. | | | | integrates wholesale and retail competition. |
| The investment and building generation capacity also | | | | Generation is separate from retail. Because retailers |
| added something that Texas needed as a rapidly | | | | and their customers can choose where they buy |
| growing state: reliability. For example, on a hot July | | | | power from, power generating companies are forced |
| day, electricity demand in the ERCOT area can | | | | to produce power more efficiently because they are |
| threaten to overload both generators and | | | | competing with other generator plants in other |
| transmission lines. The result would be a blackout of | | | | counties - and in some cases, even in other states. |
| large areas of the state. By building additional | | | | Retailers, meanwhile, have to be more efficient and |
| generators, more power can be generated to make | | | | careful in their purchasing and selling of power. |
| up for system short-falls. Also, different generators | | | | It is no secret that the Texas electricity deregulation |
| can be brought on line to take over for generators | | | | process has been rocky. Part of the reason has been |
| that need maintenance or upgrades. | | | | volatile fuel prices brought on by international political |
| The next reason is that restructuring has spurred the | | | | and economic turmoil over the years. However, |
| growth of more efficient, less-polluting electricity | | | | markets don't guarantee the lowest possible prices. |
| technologies. During the regulated utility years, | | | | They do guarantee the best possible prices based on |
| innovation and alternative energy development | | | | a customer's preference. Of course, when looking for |
| languished, rarely moving beyond the demonstration | | | | the best price, be it groceries or gasoline, information |
| phase. However, both the rising cost of energy | | | | is a consumer's best friend. In a deregulated market, |
| production and concerns over the environment have | | | | consumers can save money on their Texas electricity |
| spurred new development in co-generation, combined | | | | bills by staying informed about their energy usage, |
| cycle generation, and green power. Nationwide, there | | | | their energy plan's pricing, and their energy provider's |
| is a huge demand for green power; customers are | | | | competitors. The quickest way to lower your electric |
| now more aware of greenhouse gases and climate | | | | bill might mean shopping around for a better deal. |
| change. Currently, more companies sell green power | | | | For example, residents in a Fort Worth seniors |
| than ten years ago. This is not just because it is | | | | community recently had their eyes opened when |
| popular, but companies also see that green power | | | | columnist Dave Lieber of the Fort Worth |
| sources are less expensive to operate in the long | | | | Star-Telegram found that many were paying as |
| term than conventional systems. Two of the biggest | | | | much as 14 or 15 cents per kWh. Why? Possibly |
| innovations in green electrical power in Texas are | | | | because many had only known the old utility |
| wind and solar power. | | | | monopoly their whole lives. They were used to the |
| Currently Texas leads the nation in wind-generated | | | | state making the choices and setting the prices. This |
| energy production with over 9,000 MW of installed | | | | was an incident where just a little information can |
| wind energy. Over 2,000 wind turbines operate in the | | | | save you a lot of money. |
| West Texas hills alone and the numbers continue to | | | | Remember the place to begin shopping is at |
| increase with development costs dropping and wind | | | | Powertochoose.org. |
| turbine technology improving. In 2007, Texas became | | | | The past ten years have brought improved reliability |
| the first State to reach the milestone of one | | | | to Texas' growing energy demands. The old |
| giga-watt of wind capacity installed in a single year. | | | | regulated system never could have kept up. Because |
| At 736 MW, the Horse Hollow Wind Energy Center in | | | | of deregulation, there are more generation |
| central Texas is the largest wind power facility in the | | | | developments and greener innovations that make |
| world. Recently, the state finalized a plan for a 17,000 | | | | power more efficiently. There is now more reliability |
| MW increase in wind capacity that will meet the | | | | in power transmission with efficiency cutting both |
| federally mandated Renewable Portfolio Standard | | | | waste and energy cost in Texas. And finally, market |
| (RPS) years ahead of schedule. | | | | competition has stimulated generators and retailers to |
| In spite of the defeat in 2009 of a $500 million state | | | | cut their costs to deliver better service at a lower |
| legislature plan to develop solar energy in Texas, the | | | | price to consumers. |
| interest in taking advantage of Texas sun is still | | | | That's why all the other states are following Texas. |