By Yang Bai and Le Xie.
The goal of this blog post is to present some information on the retail electric market in Texas, the retail electric provider and the retail electric plan.
1. What is the background of the retail market in Texas?
In 1999, the Texas Legislature passed Senate Bill 7 (S.B.7) related to electric utility restructuring and to the powers and duties of the Public Utility Commission of Texas [1]. The S.B.7 introduced retail competition in much of ERCOT. The S.B.7 was fully effective starting from January 1, 2002 in the service areas of investor-owned utilities within ERCOT. The competitive retail areas delineated by the Transmission & Distribution Utilities (TDU) are shown in Fig. 1.
The goal of this blog post is to present some information on the retail electric market in Texas, the retail electric provider and the retail electric plan.
1. What is the background of the retail market in Texas?
In 1999, the Texas Legislature passed Senate Bill 7 (S.B.7) related to electric utility restructuring and to the powers and duties of the Public Utility Commission of Texas [1]. The S.B.7 introduced retail competition in much of ERCOT. The S.B.7 was fully effective starting from January 1, 2002 in the service areas of investor-owned utilities within ERCOT. The competitive retail areas delineated by the Transmission & Distribution Utilities (TDU) are shown in Fig. 1.
The introduction of retail competition allowed customers who live in competitive areas to make their own choices from various electricity service plans with different prices, term lengths and other incentives offered by Retail Electric Providers (REPs). REPs will compete with each other trying to provide best electricity service for customers.
The goal of REP is to lower prices and encourage innovative products and services. The market works satisfactorily so far. Texas ranks number one for the past seven years in the Annual Baseline Assessment of Choice in Canada and the United States [3], a scorecard developed by research group DEFG that measures the success of U.S. states and Canadian provinces in implementing a competitive retail market.
2. What is a Retail Electric Provider (REP)?
According to the Utilities Codes Chapter 31. General Provisions Sec. 31.002. Definitions, a REP means “a person that sells electric energy to retail customers in this state. A retail electric provider may not own or operate generation assets” [4].
Therefore, basically, a REP sells electric energy to retail customers in the areas of Texas where retailing electricity is open to competition. The main responsibility of a REP includes buying electricity from the wholesale market, buying delivery service and paying the charges to TDU, seeking customers to buy retailing electricity, and provide related services to customers [5].
3. How many REPs are available in Texas?
According to the Report to the 84th Texas Legislature: Scope of Competition in Electric Markets in Texas [6], the number of REPs and competitive offers remained stable in last year. As of September 2014, 114 REPs were actively doing business in ERCOT, and over 300 products with 100% renewable content were available. Particularly, the numbers of REPs serving residential customers and the associated number of product offerings delineated by TDUs are shown here in Table 1.
The goal of REP is to lower prices and encourage innovative products and services. The market works satisfactorily so far. Texas ranks number one for the past seven years in the Annual Baseline Assessment of Choice in Canada and the United States [3], a scorecard developed by research group DEFG that measures the success of U.S. states and Canadian provinces in implementing a competitive retail market.
2. What is a Retail Electric Provider (REP)?
According to the Utilities Codes Chapter 31. General Provisions Sec. 31.002. Definitions, a REP means “a person that sells electric energy to retail customers in this state. A retail electric provider may not own or operate generation assets” [4].
Therefore, basically, a REP sells electric energy to retail customers in the areas of Texas where retailing electricity is open to competition. The main responsibility of a REP includes buying electricity from the wholesale market, buying delivery service and paying the charges to TDU, seeking customers to buy retailing electricity, and provide related services to customers [5].
3. How many REPs are available in Texas?
According to the Report to the 84th Texas Legislature: Scope of Competition in Electric Markets in Texas [6], the number of REPs and competitive offers remained stable in last year. As of September 2014, 114 REPs were actively doing business in ERCOT, and over 300 products with 100% renewable content were available. Particularly, the numbers of REPs serving residential customers and the associated number of product offerings delineated by TDUs are shown here in Table 1.
If you are interested in the detail information about REPs, a directory of REPs can be found in this website.
4. How many consumers in Texas can choose the retail competition?
According to the Report to the 84th Texas Legislature [6], as of September 2014, the competitive market includes 5,955,761 (85.15%) residential customers, 1,034,600 (14.84%) commercial customers, and 3,848 (0.01%) industrial customers. Another important indicator is that 90% of all customers in the competitive areas had at least one change to their REP. Fig. 2 shows the breakdown of customer types.
4. How many consumers in Texas can choose the retail competition?
According to the Report to the 84th Texas Legislature [6], as of September 2014, the competitive market includes 5,955,761 (85.15%) residential customers, 1,034,600 (14.84%) commercial customers, and 3,848 (0.01%) industrial customers. Another important indicator is that 90% of all customers in the competitive areas had at least one change to their REP. Fig. 2 shows the breakdown of customer types.
5. How does the rate change with the introduction of the retail competition?
As shown in Table 2, a comparison is made in [6] to depict the difference between the last regulated rate in ERCOT regions now open to competition and the current lowest 12-month fixed retail offering per MWh in each region (delineated by TDU), adjusted for inflation. Although the current price here is the lowest 12-month fixed rate which is the best sample to compare, the fact As shown in Table 2, a comparison is made in [6] to depict the difference between the last regulated rate in ERCOT regions now open to competition and the current lowest 12-month fixed retail offering per MWh in each region (delineated by TDU), adjusted for inflation. Although the current price here is the lowest 12-month fixed rate which is the best sample to compare, the fact is that the retail competition witness a significant drop of retail electricity price.
As shown in Table 2, a comparison is made in [6] to depict the difference between the last regulated rate in ERCOT regions now open to competition and the current lowest 12-month fixed retail offering per MWh in each region (delineated by TDU), adjusted for inflation. Although the current price here is the lowest 12-month fixed rate which is the best sample to compare, the fact As shown in Table 2, a comparison is made in [6] to depict the difference between the last regulated rate in ERCOT regions now open to competition and the current lowest 12-month fixed retail offering per MWh in each region (delineated by TDU), adjusted for inflation. Although the current price here is the lowest 12-month fixed rate which is the best sample to compare, the fact is that the retail competition witness a significant drop of retail electricity price.
The rates of Texas are also competitive compared with the United States average, as shown in Fig. 3. Average retail rates in Texas are lower than the national average level in all three sectors.
6. What types of electricity plans are offered by REPs in Texas?
In terms of rate, there are mainly three types of plans offered by most REPs [7].
6.1. Fixed Rate Plan
With a fixed rate plan, the price (usually cents per kWh) does not change within the contract period except for changes in Transmission and Distribution fees, changes in ERCOT, the Texas electric grid, or Texas Regional Entity administrative fees, or changes resulting from federal, state or local laws that impose fees beyond the REP’s control. The fixed plan is popular because it helps budgeting the electricity expense. However in most cases, you may not enjoy the lower market price unless you pay a cancellation fee in order to end your contract before it naturally ends.
6.2 Variable Rate Plan (Month-to-Month)
Variable rate plans usually have no monthly contract or cancellation fee, but the rate can vary from month to month. Based on the market price and the discretion of the REP, the rate can increase or decrease. Typically customers have to be closely aware of the market price and adjust their consumption in order to benefit from falling market prices and avoid higher rates if market prices spike due to reasons including extreme weather, natural disasters, etc.
6.3 Indexed Plan (Market Rate)
Similar to the variable plan, the prices of indexed or market rate plans can go up or down. The difference is that the rates of indexed plans are directly tied to a pricing formula connected to a publicly available index. In order to benefit from an index plan, customers should ask the REP for specific formula as well as how and when they will receive notifications of changes to the index.
Besides the basic types of plans, the REPs may also offer a time-of-use service under one of these plans where the per kWh charge will vary depending on the time of day or the day that the service is used. Time-of-Use service usually aims at encouraging customers to use power during non-peak hours such as nights or weekends. The average price calculations for the time-of-use plan service are based on the REP’s estimation of the percentage of energy used during free or discounted hours versus non-free or premium non-discounted hours. Different REPs and products may provide different calculations [7].
Payment options can vary too. Any plan of the three types can have the prepaid service option which allows customers to make electric service purchase in advance. Then service is provided on a “pay-as-you-go” manner.
In terms of the electricity being served, e.g., how much renewable energy included and how much emissions released from producing the electricity, REPs are required by the Public Utility Commission of Texas to provide customers with the Electricity Facts Label (EFL) along with each of their plans. The EFL, similar to a nutrition label found on a juice box, provides information on electricity prices, contract terms, sources of generation, and emissions levels. The information allows customers to make a fully-informed decision about their electric service. Samples of an EFL can be found in the following links: Link1, Link2
7. If I am an end-use customer, how could I find the plan best for me?
In order to help customers acquire all relevant information necessary to make fully-informed choices, the Public Utility Commission of Texas launched the PowerToChoose.org website for Texans shopping for a retail electric provider. The PowerToChoose.org website is like a buying-electricity version of www.priceline.com. A customer is able to compare plans available for them by simply entering his or her zipcode. Customers also can refresh plans by the TDU area, estimated use, price, contract length, plan type, prepaid option, time-of-use option, company scores, renewable energy content, and electric companies. A typical page of the website is shown in Fig. 4.
In terms of rate, there are mainly three types of plans offered by most REPs [7].
6.1. Fixed Rate Plan
With a fixed rate plan, the price (usually cents per kWh) does not change within the contract period except for changes in Transmission and Distribution fees, changes in ERCOT, the Texas electric grid, or Texas Regional Entity administrative fees, or changes resulting from federal, state or local laws that impose fees beyond the REP’s control. The fixed plan is popular because it helps budgeting the electricity expense. However in most cases, you may not enjoy the lower market price unless you pay a cancellation fee in order to end your contract before it naturally ends.
6.2 Variable Rate Plan (Month-to-Month)
Variable rate plans usually have no monthly contract or cancellation fee, but the rate can vary from month to month. Based on the market price and the discretion of the REP, the rate can increase or decrease. Typically customers have to be closely aware of the market price and adjust their consumption in order to benefit from falling market prices and avoid higher rates if market prices spike due to reasons including extreme weather, natural disasters, etc.
6.3 Indexed Plan (Market Rate)
Similar to the variable plan, the prices of indexed or market rate plans can go up or down. The difference is that the rates of indexed plans are directly tied to a pricing formula connected to a publicly available index. In order to benefit from an index plan, customers should ask the REP for specific formula as well as how and when they will receive notifications of changes to the index.
Besides the basic types of plans, the REPs may also offer a time-of-use service under one of these plans where the per kWh charge will vary depending on the time of day or the day that the service is used. Time-of-Use service usually aims at encouraging customers to use power during non-peak hours such as nights or weekends. The average price calculations for the time-of-use plan service are based on the REP’s estimation of the percentage of energy used during free or discounted hours versus non-free or premium non-discounted hours. Different REPs and products may provide different calculations [7].
Payment options can vary too. Any plan of the three types can have the prepaid service option which allows customers to make electric service purchase in advance. Then service is provided on a “pay-as-you-go” manner.
In terms of the electricity being served, e.g., how much renewable energy included and how much emissions released from producing the electricity, REPs are required by the Public Utility Commission of Texas to provide customers with the Electricity Facts Label (EFL) along with each of their plans. The EFL, similar to a nutrition label found on a juice box, provides information on electricity prices, contract terms, sources of generation, and emissions levels. The information allows customers to make a fully-informed decision about their electric service. Samples of an EFL can be found in the following links: Link1, Link2
7. If I am an end-use customer, how could I find the plan best for me?
In order to help customers acquire all relevant information necessary to make fully-informed choices, the Public Utility Commission of Texas launched the PowerToChoose.org website for Texans shopping for a retail electric provider. The PowerToChoose.org website is like a buying-electricity version of www.priceline.com. A customer is able to compare plans available for them by simply entering his or her zipcode. Customers also can refresh plans by the TDU area, estimated use, price, contract length, plan type, prepaid option, time-of-use option, company scores, renewable energy content, and electric companies. A typical page of the website is shown in Fig. 4.
Using the user-friendly interfaces of the website, customers are able to choose the plan most suitable for their need. With the information provided by the website, customers can also directly contact any REP to obtain detail information about service offerings and make their own decisions. Similar plan-comparison websites are listed as follows. Link1, Link2, Link3.
To get information about how to save energy, one can also turn to the website http://www.powertosavetexas.org/, which is part of a statewide initiative called "Power to Save Texas" which aims to educate Texans on energy conservation.
8. What is an aggregator and what is the difference between an aggregator and a REP?
According to the Utilities Codes Chapter 31. General Provisions Sec. 31.002. Definitions [4], a REP means a person that sells electric energy to retail customers in this state. An REP may not own or operate generation assets.
In contrast, according to [4], aggregation includes the following: (A) the purchase of electricity from a retail electric provider, a municipally owned utility, or an electric cooperative by an electricity customer for its own use in multiple locations, provided that an electricity customer may not avoid any nonbypassable charges or fees as a result of aggregating its load; or (B) the purchase of electricity by an electricity customer as part of a voluntary association of electricity customers, provided that an electricity customer may not avoid any nonbypassable charges or fees as a result of aggregating its load.
Therefore, acting like an agent, an aggregator joins customers together as a single buyer and purchases electricity service in Texas on the behalf of those customers. An aggregator will generally be compensated by REPs, but may take payments from the customers in certain circumstances. But an aggregator must inform the customers of its compensation method. In addition, now aggregators could have affiliate relationships with REPs but they have to disclose them [8].
One can find the directory of aggregators in the following website: Link1
References
[1] Senate Bill 7 (1999). Texas Legislature Online. [Online]. Available: http://www.legis.state.tx.us/billlookup/History.aspx?LegSess=76R&Bill=SB7
[2] Electric Retail Service Area Map - Investor Owned Utilities and certain Municipal Utilities, Public Utility Commission of Texas. [Online]. Available: https://www.puc.texas.gov/industry/maps/maps/tdumap.pdf
[3] Annual Baseline Assessment of Choice in Canada and the United States, Distributed Energy Financial Group, January 2014. [Online]. Available: http://www.competecoalition.com/files/ABACCUS-2014-vf.pdf
[4] Utilities Codes Chapter 31, General Provisions Sec. 31.002, Definitions, Texas Constitution and Statutes. [Online]. Available: http://www.statutes.legis.state.tx.us/Docs/UT/htm/UT.31.htm#31.002
[5] REP - Retail Electric Providers Certification and Reporting, Public Utility Commission of Texas. [Online]. Available: https://www.puc.texas.gov/industry/electric/business/rep/Rep.aspx
[6] Report to the 84th Texas Legislature: Scope of Competition in Electric Markets in Texas, Public Utility Commission of Texas. [Online]. Available: http://www.puc.texas.gov/industry/electric/reports/scope/2015/2015scope_elec.pdf
[7] Utili-Facts: Types of Electric Plans, Electric Reliability Council of Texas. [Online]. Available: http://www.puc.texas.gov/consumer/facts/factsheets/elecfacts/Electricplans.pdf
[8] AGG - Aggregator Registration and Reporting, Public Utility Commission of Texas. [Online]. Available: https://www.puc.texas.gov/industry/electric/business/agg/agg.aspx
To get information about how to save energy, one can also turn to the website http://www.powertosavetexas.org/, which is part of a statewide initiative called "Power to Save Texas" which aims to educate Texans on energy conservation.
8. What is an aggregator and what is the difference between an aggregator and a REP?
According to the Utilities Codes Chapter 31. General Provisions Sec. 31.002. Definitions [4], a REP means a person that sells electric energy to retail customers in this state. An REP may not own or operate generation assets.
In contrast, according to [4], aggregation includes the following: (A) the purchase of electricity from a retail electric provider, a municipally owned utility, or an electric cooperative by an electricity customer for its own use in multiple locations, provided that an electricity customer may not avoid any nonbypassable charges or fees as a result of aggregating its load; or (B) the purchase of electricity by an electricity customer as part of a voluntary association of electricity customers, provided that an electricity customer may not avoid any nonbypassable charges or fees as a result of aggregating its load.
Therefore, acting like an agent, an aggregator joins customers together as a single buyer and purchases electricity service in Texas on the behalf of those customers. An aggregator will generally be compensated by REPs, but may take payments from the customers in certain circumstances. But an aggregator must inform the customers of its compensation method. In addition, now aggregators could have affiliate relationships with REPs but they have to disclose them [8].
One can find the directory of aggregators in the following website: Link1
References
[1] Senate Bill 7 (1999). Texas Legislature Online. [Online]. Available: http://www.legis.state.tx.us/billlookup/History.aspx?LegSess=76R&Bill=SB7
[2] Electric Retail Service Area Map - Investor Owned Utilities and certain Municipal Utilities, Public Utility Commission of Texas. [Online]. Available: https://www.puc.texas.gov/industry/maps/maps/tdumap.pdf
[3] Annual Baseline Assessment of Choice in Canada and the United States, Distributed Energy Financial Group, January 2014. [Online]. Available: http://www.competecoalition.com/files/ABACCUS-2014-vf.pdf
[4] Utilities Codes Chapter 31, General Provisions Sec. 31.002, Definitions, Texas Constitution and Statutes. [Online]. Available: http://www.statutes.legis.state.tx.us/Docs/UT/htm/UT.31.htm#31.002
[5] REP - Retail Electric Providers Certification and Reporting, Public Utility Commission of Texas. [Online]. Available: https://www.puc.texas.gov/industry/electric/business/rep/Rep.aspx
[6] Report to the 84th Texas Legislature: Scope of Competition in Electric Markets in Texas, Public Utility Commission of Texas. [Online]. Available: http://www.puc.texas.gov/industry/electric/reports/scope/2015/2015scope_elec.pdf
[7] Utili-Facts: Types of Electric Plans, Electric Reliability Council of Texas. [Online]. Available: http://www.puc.texas.gov/consumer/facts/factsheets/elecfacts/Electricplans.pdf
[8] AGG - Aggregator Registration and Reporting, Public Utility Commission of Texas. [Online]. Available: https://www.puc.texas.gov/industry/electric/business/agg/agg.aspx