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Who’s Who in the Texas Electricity Market
The following subjects will be addressed and clarified to help all Texans better understand the nature of the Texas electricity market:
* The Public Utility Commission of Texas and it’s role in protecting your electricity rights, in addition to specific responsibilities and regulations therein.
* The role of the Retail Electric Provider (REP).
* Transmission and distribution of electricity and its relationship to the power generators, REPs and the consumer.
* Power generators and their role in producing electricity and placing it on the grid.
* The Electricity Reliability Council of Texas and it’s role in the management of Texas electricity.
Each section will detail the important players, their responsibilities in the Texas electricity market and how each affects the energy bottom line for Texas businesses and consumers.
The Public Utility Commission of Texas (PUCT)
What is the PUCT?
The Public Utility Commission of Texas (PUCT) is a local state agency responsible for the regulation of electric and telecommunications services. Its primary mission is to ensure consumer protections are in place, foster healthy competition and promote high quality and safe energy and telecommunication infrastructures.
In addition to operating a consumer information hot line, The PUCT also regulates rates and services of all investor-owned electric and local telephone companies, sets and maintains ongoing standards of service for regulated electric companies, and issues statewide franchises for cable TV and video services.
Here is a list of the consumer services that the PUCT does have authority to regulate:
* Long distance
* Wireless telecommunications service
* Gas
* Water
* Cable TV rates and content
* Rates established by municipal electric utilities
* Rates established by electric cooperatives
* Internet
* ISDN
What Role does the PUCT Play in Texas Electricity Service?
The PUCT is vitally important in the deregulated electricity market in Texas. Though it’s swiftly becoming more common knowledge that Texas is a mostly deregulated state for electricity, the mere fact that Texans do have the power to choose their electric provider is often lost in the fray of misinformation.
The PUCT is quite simply a consumer advocate for choice in the Texas electricity market. The PUCT is primarily responsible for regulating rates and terms of service for both transmission and distribution in Texas’ deregulated areas, oversight of the ERCOT market, managing renewable energy resources, ensuring consumer protections for retail electric service and more.
What the PUCT does not do is endorse particular electricity providers over another, which helps to foster competition and protect consumer rights that would not survive otherwise.
The PUCT and ERCOT
The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to 22 million Texas customers, managing a grid that carries more than 85 percent of the state’s electric load. ERCOT monitors and maintains nearly 40,000 miles of transmission line across 75 percent of Texas, amounting to a large portion of the state’s deregulated electricity areas.
The PUCT specifically provides oversight of ERCOT, ensuring that all market rules are thoroughly reviewed at the behest of public interests. ERCOT actually monitors system reliability as well, so when you think of the vast majority of the deregulated market in Texas, think ERCOT and it’s friendly PUCT neighbor.
The PUCT and Texas Electric Choice
The PUCT operates the Texas Electric Choice Web site that is devoted to providing information for consumers looking to switch electricity providers. The site details the benefits of switching, what Texas electric choice means to the consumer, PUCT regulated terms of service and consumer protections, general information about electricity deregulation in Texas and more.
The PUCT and Texas Electric Choice, or powertochoose.org, specifically provides electricity consumers with:
* Details about electric choice including the basics of the retail electric market in Texas, electricity generation, the transmission and delivery of electricity and how that is maintained, and the general safety and reliability of electricity service in Texas markets.
* General information about the PUCT and a link to their site.
* The process of switching electricity providers.
* Introduction to energy conservation, efficiency and general money saving tips.
* Questions to ask potential electricity providers.
* Understanding the choices consumers have when comparing providers.
* Offer information from Texas Retail Electric Providers (REPs)
Sources
“PUCT”:http://www.puc.state.tx.us/ocp/complaints/regulate.cfm
“ERCOT”:http://www.ercot.com/about/
“Power to Choose”:http://powertochoose.org/index.asp
The Role of the REP in Texas
There is a lot of confusion surrounding exactly how the electricity market works in the deregulated areas of Texas. Despite the fact that areas of the Texas electricity market have been deregulated for almost a decade, some people don’t really understand who the different players are in the Texas marketplace and the extent of their roles and responsibilities. However, the most forward facing and well-known players in the Texas electricity market are without a doubt the Retail Electricity Providers (REPs).
What is an REP?
REPs are common and well-recognized companies that provide you with the billing and customer service aspects of your electricity service. Reliant, TXU, Bounce Energy and Gexa are a few example of Texas electricity providers, or REPs. The biggest reason that these are the most known entities in the Texas energy market is the simple fact that the REP sends you a bill every month, in addition to handling turn on and turn off of service. First on their list of priorities and responsibilities is the customer relationship.
A Texas REP competes for your business by offering a a variety of rate plans, incentives and specials for new customers, renewable energy options and more.
What Exactly does an REP provide?
The life cycle of REP to customer goes something like this:
- Customers call up an REP like Bounce Energy or Reliant, and place an order for electricity service.
- The REP on the other end is then responsible for logging that order with the local TDSP (Transmission/Distribution Service Provider) and ensuring that electricity service will be turned on and ready at the specified date on the order.
- Once the service is turned on, it is the responsibility of the REP to monitor and bill a customer for their electricity usage and collect the outstanding debt.
- By the same token, when something goes wrong with a customer’s electricity service or there are any outstanding questions, it’s the REP’s role to field those calls and work with the customer to find the most satisfactory resolution possible.
So, to sum up, an REP is responsible for all of the customer-facing responsibilities in the Texas electricity market, from making sure the lights get turned on (and stay on) to billing the customer and providing customer service.
What Makes a Texas REP Unique?
So now that we understand at a basic level what a Retail Electricity Provider does, we should next take a look at what separates one REP from another as far as the customer is concerned. What separates each company is an illustration of one of the reasons the Texas electricity market was deregulated to begin with: Service.
The creation of competition in Texas forces companies to work harder to bring value to their customers in order to retain and attract new business. The most obvious value to a customer is lower prices, and at the end of the day, it’s obviously the most important. Competition in the market place forces companies to try and be as efficient as possible to keep their electric rates as close as possible to the market basement.
At the same time, there are other things that a good REP can offer to their customers. Excellent customer service and having a knowledgeable staff that can answer questions is a highly valued asset to an REP. One of the most common customer complaints among customers is waiting too long on hold or getting the run around from customer service and billing departments. Differentiating or weeding through the good versus the bad when choosing an electricity provider is an advantage that Texans in deregulated areas have.
REP’s in competitive areas usually offer versatile energy plans, such as low variable or fixed rates, or the chance for customers to order Green energy plans in order to entice new customers to sign up for service. Certain providers also offer incentives to their customers, like rebates, bill credits, airline miles and more.
The competition that is created by the deregulation of the Texas electricity market forces the different REPs to work as hard and as efficiently as possible to try and stay competitive with other companies in their marketplace. And since the REPs are responsible for the customer relationship in the Texas marketplace, that competition forces the REPs to offer the best rates, service, and overall value to the customers to make sure they keep their customer base as well as attract new. And at the end of the day, this benefits the customer, because not only do they have a number of options to find the best company for themselves, but the checks and balances created by the presence of competition helps keep the REPs honest.
The Role of the TDSP In Texas
TDSP stands for Transmission/Distribution Service Provider. That probably doesn’t mean all that much to the average Texan, although I’d wager it’s only the term that is unfamiliar, and not actually the companies themselves. But first, let’s take a quick look at what a TDSP is exactly, and what their role is in energy service after Texas became deregulated.
History of the TDSP in Texas Electricity
When the state of Texas deregulated, it forced the incumbent companies (like Reliant, TXU, etc) to break up into different pieces. Before the electric companies provided full scale electricity service, which included maintenance of the electricity infrastructure and getting electricity from the plants to the customers, from start to finish (with a few exceptions). When the state of Texas deregulated, that practice made way for individual Retail Electricity Providers (REPs). At this point, it became a conflict of interest for the already existing former Incumbents to retain ownership of their own Transmission and Distribution systems, as it would create an obvious competitive advantage for the bigger and already established companies.
At the same time, it was also illogical and unreasonable to expect smaller and newly created REP’s to have to build and create their own infrastructure for delivering electricity to their customers. One, it would create excessive redundancy that would be expensive and serve no purpose, and two, the amount of money it would take to construct an infrastructure from scratch would act as immediate barriers of entry for new companies, defeating the entire purpose of deregulation in the first place.
The Difference between a TDSP and the REP
The TDSP, as already mentioned, maintain the infrastructure for electricity transmission or distribution. The names you probably recognize include Centerpoint (split from Reliant), Oncor (Splint from TXU) Texas New Mexico Power Company, AEP North, and AEP Central. These are the TDSPs who own the power lines and come out to repair them when they go down. They’re also responsible for transmitting the electricity over those lines from the power generators and into a customer’s home. The electricity they own they sell to the REPs wholesale, and they also charge the REP’s monthly charges for the upkeep of the infrastructure.
So that is a quick overview of how the TDSPs work in the state of Texas. To use a metaphor that helps make the understanding easier, the TDSPs are like the guys who ship in all the popcorn, hot dogs, sodas and pretzels to the ballparks, which customers then walk up to counters and purchase at the concession stands. They essentially “stock the shelves” for the customers.
Power Generators in Texas Electricity
Being the leading crude-oil producing state in the U.S., Texas plays a vital role in the country’s overall energy capacity. Texas not only provides a quarter of the nation’s refining capacity with nearly 5 million barrels of oil processed per day, but also accounts for a quarter of total natural gas production as the nation’s leading producer.
So it goes without saying that power generation companies are not few and far between in the Lone Star State.
What is a Texas Power Generator?
Power generators or power generation companies use natural gas, coal, wind, nuclear, biomass and hydro to produce the power that Texas businesses, residents and commercial facilities count on. Power generation companies own and operate the power plants responsible for producing energy sold on the wholesale market to Retail Electric Providers in Texas, who of course turn around and package it for the consumer.
Texas power generation companies are responsible for a vast portion of the country’s energy capacity, with Texas specifically the leader in wind energy development throughout the entire U.S.
Major Texas Power Generators
There are of course numerous power generators in Texas and several subsidiaries that are responsible for generating the power placed on the grid and transmitted to homes and businesses across the state.
Here are the major players in Texas power generation:
“Luminant”: http://www.luminant.com/about/default.aspx
Luminant is a subsidiary of Energy Future Holdings (EFH), formerly TXU Corp., and generates more than 16,100 megawatts (MW) of energy in Texas, including 2,300 MW of nuclear and 5,800 MW of capacity generated from coal. Luminant also happens to be the largest purchaser of clean electricity generated from wind in Texas and fifth largest in the United States.
“NRG Energy, Inc.”: http://www.nrgenergy.com/index.htm
Founded in 1989, NRG currently has a capacity of more than 24,000 MW across the globe, including nearly 11,000 MW in Texas. NRG also has full or part ownership in 44 power generation plants.
“Suez Energy”: http://www.suezenergyna.com/ourcompanies/energygen.shtml
Suez Energy Generation is located in the heart of energy land in Houston, Texas. Suez owns and operates 72 power, cogeneration, steam, and chilled-water facilities, with a total power capacity of more than 7,750 MW. Suez power generation facilities use various fuels to produce electricity, including renewable resources.
“Shell”: http://www.shell.com
Providing the world’s first commercial gas liquification plant in 1964, Shell is one of the largest energy producers in the world, active in everything from gas-to-liquids, wind and solar energy to coal gasification technology. In addition to providing gasoline for automobiles across the country, Shell is also heavily involved in building and operating natural gas pipelines, and developing wind and solar technology.
Power generation companies are essentially the first line of a long conveyor belt that serves the Texas electricity market from generation to home and business. As the means to improve infrastructure and add additional power plants becomes available, Texas is generally at the front of the pack when it comes to producing energy in new, more ecological, efficient and abundant ways.
The Role of ERCOT in Texas
ERCOT is otherwise known as The Electricity Reliability Council of Texas. ERCOT may not affect you directly, but through its actions helps insure you safe reliable electricity for your home.
What is ERCOT?
The Electricity Council of Texas (ERCOT) is a nonprofit corporation entity under NERC/FERC, which manages the flow of electricity and power to over 22 million Texas electricity consumers. ERCOT schedules power to an electric grid that covers over 38,000 miles of Texas Electricity Transmission, equivalent to 85% of the state’s electric load. ERCOT manages 75% of the deregulated electricity market in the state. ERCOT also oversees financial settlements for the wholesale bulk-power market in Texas as well as customer switching for more than 6.5 million Texans in deregulated areas.
What Role does ERCOT play in Texas Electricity Market?
The Electricity Reliability Council of Texas (ERCOT) is overseen and regulated by The Public Utility Commission of Texas (PUCT). The PUCT aids in ERCOT performing its role in the Texas electricity market by helping manage the power grid and ensuring that market rules are in place to protect consumers.
One of ERCOT’s major roles in the Texas Electricity Market is to ensure that consumers have reliable electric service. ERCOT performs this role by constantly monitoring and analyzing all power grid components every 2-4 seconds for status updates. ERCOT also directs the flow of electricity in conjunction with your local Transmission and Distribution Service Provider (TDSP) so you can have safe and reliable energy.
ERCOT also plays a huge role in the deregulated Texas Electricity Market. Now that people in Texas have the power to choose their own Retail Electric Provider (REP), ERCOT’s role is to help facilitate retail registration of energy and also help the switching process fpr Texas electricity companies and their customers.
Market Process and Participants
Although ERCOT is managed and regulated by the PUCT, it is not the key reason why ERCOT is able to fulfill its roles in the Texas Electricity Market. There are four major entities that help ERCOT perform its three processes in Texas: Qualified Scheduling Entities (QSE), Resource Entities (REs), Load Serving Entities (LSE), and the Transmission and Distribution Service Providers (TDSPs).
Market Operations:
Qualified Scheduling Entities (QSE) is the key part of the market operations of ERCOTs process. QSE submits daily schedules for their bilateral transactions with total generations and demand. QSEs also place bids for ancillary service and settle financial payments with ERCOT.
Power Operations:
Resource Entities are facilities that are represented by a QSE that has been approved and capable of providing energy. Resource Entities either own or manage a generation resource or has the option to act as a Load Acting as a Resource (LaaR) that correlates with ERCOT instructions to lower electricity usage or provide ancillary service.
The Transmission and Distribution Service Providers (TDSPs) transmit and delivers the electricity to a customer’s home or business along the poles and wires. This company is responsible for maintenance and repair of these poles wires.
Commercial Operations:
Load Serving Entities (LSE) provides electrical service to retail and wholesale customers. LSE includes competitive retailers that sell electricity in Texas in a competitive market.
The Texas Electricity Market in 2009
Deregulation provides not only unique benefits to the Texas electricity consumer, but also unique structural and logistical needs in order to ensure that electricity service across the state remains safe and reliable. Moving forward into 2009, the continued growth of deregulation in the Texas electricity market only serves to increase competition and foster more opportunity for affordable and reliable electric service.
Each of the players in the Texas electricity market detailed above are essential cogs in the wheel that ensure energy is generated in an efficient and cost-effective manner, that the wholesale and retail markets are maintained with consumer protection and good business practice in mind, and that ultimately the electricity reaches its final destination in a safe and ongoing, reliable manner.
About the Author
Bounce Energy is a Texas Electric Company based in Houston. Bounce Energy’s goal is provide more than low Texas Electric Rates to our customers. With innovative and flexible plans, excellent customer service, and superior customer rewards, Bounce Energy offers a unique approach to Texas electricity.
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