PAL Energy Smart, LLC

​Understanding Energy and Choosing What’s Best for You

Texas Electricity Deregulation:   What Does That Mean?

Even though you might have lived in Texas for your entire life, that doesn't mean you pay much attention to the electricity, oil, and gas markets. This is especially true when it comes to understanding what Texas electricity deregulation really means and how it affects you. So, we're happy to explain!

Before Texas Electricity Deregulation

Before Texas electricity became deregulated, it was regulated by the state government. The electricity rates were set by the Public Utility Commission of Texas (PUCT), and there was only one provider of the electricity service in each market - the utility company. That single company was responsible for generating, transmitting, distributing and selling to the consumer. With there being only one company that provided electricity for each city, this basically created a monopoly.

Ending Regulation

Why change what had been "working" for many years? Well, back in 1999, the Texas Legislature thought that by passing a deregulation law, they could get rid of electric company monopolies and reduce government control of electricity rates. The idea was that multiple Retail Electricity Providers (REPs) would create competition, and competition would drive energy prices down. And the bill passed!

Living with Texas Electricity Deregulation

Since then, the majority of Texas has become deregulated. Passage of the law allows consumers to choose who they buy their power from - just like they can choose your cell phone or cable provider. This allowed for competition for the retail component of your electricity service and spurred the creation of multiple REPs.

Who are the Players in the Texas Electricity Market?

Understanding how the deregulated Texas electricity market operates can be a daunting task. Granted, not all Texans live in areas of the state where choosing an electricity provider is an option, but understanding how the players driving the Texas electricity market work together will help you become a more informed energy consumer.

Here are the major institutions that directly impact the Texas electricity market:

1. The Public Utility Commission of Texas (PUCT) protects your electricity rights, in addition to specific responsibilities and regulations therein;

2. Electricity Reliability Council of Texas (ERCOT) manages of the Texas electricity market;

3. Retail Electricity Providers (REP's) are the independent electricity companies that sell electricity to customers;

4. The five Transmission and Distribution Service Providers (TDSP's) take care of the lines, poles, and meters across the state, acting as the go-between for the power generators, REPs, and the consumer;

5. Power generators produce electricity and place it on the grid; and

6. The customer and the power of electricity choice created by deregulation.

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.

Public Utility Commission of Texas

The Public Utility Commission of Texas (PUCT) is the state agency responsible for the regulation and oversight of electric services in Texas. The PUCT regulates the delivery of electricity to ensure the safety and reliability of your service. The mission of the PUCT is to protect customers, foster competition, and promote high quality infrastructure.

The PUCT operates as a state-level advocacy organization that protects consumers from being treated poorly by electricity companies. It's also responsible for the regulation of electric and telecommunications services. It works to ensure that the Texas electricity market maintains quality and safety and that poor business practices will not dampen the competition fostered by deregulation.

In other words, the PUCT has its hand in a wide swath of the Texas electricity market, both the regulated and deregulated varieties. It's responsible for making sure that the electricity grid is operating properly, but it also advocates for the consumer in case a Retail Electricity Provider (REP) treats a customer poorly.

Regarding the actual electricity service, the PUCT regulates the rates and terms of service for transmission and distribution of electricity by the 5 Transmission and Distribution Service Providers (TDSP's) in Texas, sustains the Electric Reliability Council of Texas (ERCOT) market (as 85% of the state's electric load is maintained by ERCOT), and administrates the state's renewable energy resources, along with sundry duties to regulate how the electricity and telecommunications market operates.

The PUCT does not 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 or Internet Service Providers (ISPs)
  • Integrated Services Digital Network (ISDN)


The Electric Reliability Council of Texas (ERCOT) administrates the Texas electricity grid and controls 85% of the deregulated electricity market in the state, making it the leading authority for the flow of electricity in Texas. As a corporation, ERCOT is comprised and governed by a board of directors from investor and municipally owned electric utilities, generators, independent members, and consumers to maintain and ensure the reliability of the power grid that operates in the State of Texas. They make sure you get electricity into your home or business.

Granted, managing the smooth delivery of power to over 22 million Texans can become a substantial undertaking, and ERCOT performs this task with an electricity grid that provides more than 85% of the electricity load for all of Texas. ERCOT is responsible for over 40,000 miles of transmission lines and 550 generation units around Texas. And on top of all those responsibilities, ERCOT also supervises the financial agreements and deals for the wholesale bulk-power market across the state, as well as ensuring the seamless switch of customers from one REP to another for the millions of Texans that live in the deregulated parts of the state.

As stated above, the PUCT specifically conducts oversight of ERCOT and ensures that the necessary and essential market rules are observed so that consumers are protected from market manipulation, power abuse, and anti-competitive business practices.

Retail Electricity Provider

A Retail Electric Provider (or REP) is any electricity company that has been approved by the Texas Public Utility Commission to sell electric services to residential and commercial customers. If you presently receive an electric bill from Bounce Energy, then Bounce Energy is your REP.
Each REP operates independently under deregulation in the Texas electricity market, as they compete with each other to entice potential customers to sign up for service. This is accomplished by offering a variety of rates and plan options (including green or renewable energy), as well as special incentives and other customer benefits.

The REP is the company in the Texas electricity market that is responsible for customer service, billing, and the actual selling of electricity service to customers. The REP is the familiar face in the Texas energy market.

What is the actual relationship between the REP and the average Texan needing electricity?

1. Whether it's a switch at your current address or a move-in at a new address, the customer contacts the REP to places a new order for service.

2. The REP logs your service order with the Transmission & Distribution Service Provider (TDSP) that services your area and with ERCOT (who ensures that service is ready for service to start with your new REP at specific start date).

3. Once service begins with your new REP, that REP takes care of your billing processes, delivers ongoing customer service to take care of your needs, and works with the TDSP and ERCOT on your behalf to guarantee you and electricity are in good standing.

Transmission and Distribution Service Provider (TDSP)

In the deregulated Texas electricity grid, the Transmission and Distribution Service Provider (TDSP) does exactly what its title suggests - it is responsible for the transmission and distribution of electricity service to all the homes and businesses within its service area. It does this because it owns all the lines, wires, poles, and meters in that service area. The TDSP (not the Retail Electricity Provider, or REP) conducts any and all maintenance and repairs required for those lines, wires, poles, and meters. There are 5 TDSP's in Texas:

1. Centerpoint
2. Oncor
3. Texas-New Mexico Power
4. AEP North
5. AEP Central

No matter which REP you choose for your electricity, each TDSP is responsible for the delivery of the electricity to each residential and commercial service address in its area. As in, if there is an outage at your home or business that is not related to you paying your bill late, then there is a problem with the TDSP, not your REP.
A TDSP performs the following:

1. Deliver electricity to the homes and businesses in its service area.

2. Maintain the poles and wires that transmit and distribute that electricity from the power generator to the electricity grid to each consumer.

3. Read each electricity meter and report that electricity consumption to each customer's REP for billing. The REP is responsible for billing, but it only generates a bill based upon the reading provided by the TDSP.

4. Restores service during a power outage.

Overall, the operations and practices of the TDSP's are strictly regulated by the Public Utility Commission of Texas (PUCT). This includes the rates assessed for transmission and distribution service; safety and reliability concerns for the delivery of the electricity; and ensuring best business practices in the relationship between the TDSP, each REP, and the consumer.

Power Generation Companies

The power generation company owns and operates the facilities that actually create the electricity we use in Texas. This includes the any and all power plants, whether it's coal, nuclear, natural gas, or renewable. As defined by the Public Utility Commission of Texas (PUCT), each power generation company produces the electricity that will be sold on the energy wholesale market, but it does not own a transmission or distribution facility in the state.

Essentially, a power generation company packages power it generates, sells it to a Retail Electricity Provider (REP) like Bounce Energy, and that REP works with each Transmission and Distribution Service Provider (TDSP) to ensure that the electricity gets to the customers in the correct service area.


To summarize:

  • The Power Generation Company creates electricity.

  • That electricity is sent to the Texas electricity grid.

  • The electricity is sold to the REP, who in turns sells it to its customers.

  • The electricity is delivered to customers by the TDSP.

  • TDSP ensures reliability of the services, maintains power lines and poles, and reads meters.

  • REP handles service and billing for its customers.

Of course, the details are slightly more technical than what's described in the 6 steps above, but we hope that this article has helped you understand how the Texas electricity grid works a bit better by discussing the various players that make it work.

What is Texas Electric Choice?

Texas Electric Choice is the power given to Texans to choose their own Retail Electric Provider. Who has the Power to Choose in Texas? Well, about 75% of the state of Texas has the power to choose their electric company, when before a single electricity provider controlled and managed the transmission, distribution and sale of electricity to residential and commercial locations. The deregulation of Texas Electricity became effective on January 1, 2002 and now offers Texans the ability to shop and compare electricity providers in their area to find the best deals and service.

Areas in Texas that have choice are:

  • Oncor Service area includes Arlington, Dallas, Fort Worth, Irving, Midland, Odessa, Plano, Richardson, Round Rock, Tyler and Waco.
  • Centerpoint Energy Service area includes Baytown, Galveston, Houston, Humble, Kingwood, Pasadena and Sugar Land.
  • AEP South Service area includes Brownsville, Corpus Christi, Harlingen, Laredo, McAllen, San Benito and Victoria.
  • AEP North Service area includes Abilene, Alpine, San Angelo and Vernon.
  • TNMP Service area includes Lewisville and various cities throughout Texas.

History of Deregulation in the Texas Electric Market

Before the Texas Senate Bill 7 (SB7) came into effect on January 1, 2002 electricity consumers didn't have the option to choose who they received electricity from. But now with the Deregulation of Texas Energy, it has broken down the market into several different Retail Electric Providers, helping create competition and lower electricity rates for consumers throughout Texas. Over 75% of Texas has been given the power to choose their own electric provider, and millions of Texans have already exercised their right to choose.
Choose the Texas Electric Plan For You

This might come as a big surprise to many of you, but deregulation has provided Texas residents with the power to choose exactly the sort of Texas electricity plan you want for your home or business. Want an even bigger surprise? The better Retail Electricity Providers (REPs) in Texas provide the widest possible variety of plans so that you can choose the plan that best meets your needs.

  • Looking for a way to pay a specific rate for your electricity usage of a set amount of time? Check out a fixed rate plan!
  • Would you rather not have a contract so that you can switch between companies at your convenience and pay market rates when they fluctuate in the consumer's favor? You're probably in the market for a variable rate, month-to-month plan!
  • Maybe you want to have all the power in your hands and pick exactly what you want in an electricity plan? You'll love Build Your Own Plan!

Fixed Rate Electricity Plans

People like stability, especially when it comes to their budget and bills. They like to know exactly what they're paying each month for their electricity, water, gas, and other expenses. When you choose a fixed rate Texas electric plan, you will receive a set rate for your electricity usage that will be constant throughout the length of your contract term. This rate represents the price for electricity that a REP has secured on the energy market for a given length of time; thus, by choosing this plan and rate, you can be assured that the rate will not change, since the company has already purchased the electricity at that rate.

The biggest advantage with enrolling in a fixed rate plan is that the constant rate you're paying for this plan protects you against fluctuations in the Texas electricity market during the duration of your contract. This is a key consideration when you live in a state like Texas that experiences big temperature extremes for a long period of time. It's why many customers select a plan length that insulates them from higher rates during summer and winter, putting their contract renewal date at a time of year that will provide for better rates.

Some people don't like fixed rate plans (especially the extra long-term ones) because they won't be able to reap the benefits when prices on the electricity market drop. Specifically, if you were on a 12-month fixed rate plan, your rate wouldn't drop in a month when prices were lower than usual. This can be frustrating or confusing when you see a new rate advertised that's lower than yours, but you can at least rest assured that your rate will not change for the life of your contract.

  • PRO: Your constant rate protects you against rising energy costs during the duration of your contract.
  • CON: With your rate locked in, you don't have the ability to take advantage of falling rates when they occur during the course of your contract.

Variable Rate (Commodity) Electricity Plan

Maybe you're the adventurous sort who likes playing the market to get the best possible rate for your electricity. You could also be someone who's been burned before by the fine print in a contract. In either case, you're probably interested in a month-to-month agreement, and for the vast majority of REPs in Texas, this will be a variable-rate plan. Electricity plans of this nature have rates that fluctuate on a regular basis, based on price shifts in the electricity market.

With a variable rate electricity plan, you will receive the benefit of a drop in price that might occur during a billing cycle. Your friends in a fixed-rate plan will be stuck paying a higher rate for electricity, while you're paying a lower rate because you chose to ride the waves of the electricity market.

But the flip side to this situation is that you could get stuck with a really high rate on occasion because of market fluctuations. This typically occurs during extreme temperature months: since people are using more electricity in the summer and winter to alternately cool or heat their homes, demand outpaces supply, and this drives up the price above what your friends with fixed-rate plans might be paying.

  • PRO: You can take advantage of rates when they drop on a month-to-month basis.
  • CON: Your rate may rise from month-to-month, usually during extreme temperature months.

Other Energy Products

  • MCPE (Index)
  • Green (Renewable)
  • Hybrid
  • Heat, etc.

Build Your Own Energy Plan

We've been talking about how deregulation in Texas gives you as the consumer the power to choose the electricity plan that you feel is best for your home or business.

Your electricity plan options include:

Plan Type (fixed-rate, variable-rate, index, hybrid, heat, etc.)
Plan Length (1, 3, 6, 9, 12, 18, 24, 36, 48, 59 to 60 months for fixed-rate plans, for example)
Payment Options (Auto Pay or manual)
Billing Options (paperless or paper bill mailed to you)
Percentage of Green Energy in your Texas Electricity
Rewards Program (available with certain REPs, or Retail Electric Providers, at any given time at their sole discretion)
We work with REPs that offer you this fully customizable energy plan experience, so we are really excited to provide this to all available Texas customers.

Contracts and Terms

Every REP that operates in Texas offers different forms of rate plans, though most offer some basic form of variable-rate plan and fixed-rate plan. It is crucial to understand what type of plan you are signing up for before making the decision, so be sure to ask the REP offering the plan(s) you like for any corresponding documents to help you learn everything you need to make an informed decision. You will need to request the Electricity Facts Label (EFL) to learn more about the plan details, rates, and charges breakdown, while the Terms and Conditions will provide an explanation of the agreements and contractual obligations of the customer and REP.

We can always provide these documents and explanations with ease to any customer who might be interested in our services. Contact our award-winning Customer Service at [email protected] or 1-888-522-8387 to speak with one of our friendly representatives.

You have the power and ability to choose exactly what sort of electricity plan you want for your home or business in Texas or another energy deregulated state. 
Understanding Energy's Rates and Fees

While few people have ever read the Apple iphone's User Agreement from start to finish, for example, many of us regularly scour through the electricity bill for your home each month for the best possible rates. We certainly don't blame you - no one wants to get charged for something you didn't use. And this goes double for fees you don't understand because you don't understand the jargon.

We want to help you become familiar with the rates, fees, and charges that appear on the average Energy bill.  

Common Terms You'll Find On Your Electricity Bill

  • Monthly Service Fee: This flat fee is applied to your bill if you use less than 2,000 kWh in a billing cycle each billing cycle. The fee primarily covers the costs of Customer Service.

  • Recurring Charges: These are the charges that you will see on every bill you receive from Bounce Energy, and they are typically the TDU Fees assessed by the TDSP / utility company for your area. For more information, please read the section below labeled (TDU Fees).

  • Non-Recurring Charges: These are charges you will see on a one-time or intermittent basis, depending upon the situation. Examples include: late fees, returned check fees, Disconnection Fees, Reconnection Fees, or any other fees disclosed in Bounce Energy's Terms of Service contract.

  • Total Current Charges: This amount includes: balance from current bill, balance(s) from preceding bill(s), payment(s) made since the preceding bill, total amount due, and a check box for the customer to voluntarily donate money to the bill payment assistance program.

  • Late Payment Penalty: This is a one-time penalty of not more than 5% the past-due balance may be charged on a delinquent bill. Outstanding delinquent balances cannot be re-penalized.

  • Local Sales Tax: This is the sales tax that is collected by your city.

  • Gross Receipts Tax (GRT): The GRT is a tax assessed by the State of Texas on retail sellers of electricity. The GRT is imposed on Retail Electricity Providers (REPs; i.e., companies like Bounce) selling electricity to all customers living in incorporated cities or towns with populations greater than 1,000 and ranges from .581% to 1.997%. This tax reimbursement is applicable regardless of customer tax status.

  • Electric Service Identifier (ESIID): This is the unique number given to your service address by ERCOT. Bounce Energy use this number to ensure that you receive the correct service.

  • Meter Number: This is the serial number of the meter recording your kilowatt-hour usage.

  • Type: This describes the kind of meter your house and/or business utilizes.

  • Multiplier (Multi): This is number your meter is multiplied by to get the correct amount of usage.

  • Current Read: This is the meter reading describing usage in the number of kilowatt-hours used at the end of the billing cycle.

  • Previous Read: This is the meter reading describing usage in the number of kilowatt-hours at the start of a new billing cycle.

  • Bill Period: This describes the length of your most recent billing cycle as a number of days in that cycle. Your bill period typically ranges from 28 to 31 days, depending on work schedule of the TDSP / utility company for your area.

  • Usage: This describes the amount of electricity you used in a billing cycle, as measured in kilowatt-hours. It is calculated as “Current Reading - Previous reading = Usage."

  • PUC Utility Assessment (PUCA) Fee: All REP's incur this fee. The state of Texas charges the PUCA on retail sellers equal to one-sixth of one percent of the charges on the seller's bill to customers, excluding sales tax.

  • Kilowatt-hours (kWh): This is a measurement of energy equal to one kilowatt (kW) of power for a one-hour duration. This is the measure of electricity usage that REP's employ to determine how much electricity you used in a billing cycle so that you can be charged for that usage.

What Are TDU Fees?

While that's a lot of information we've just shared, most folks are familiar with those above terms: they're easily understood fees and descriptions. However, when you start looking into the Transmission and Distribution Utility (TDU) Fees, it's easy to get confused, mostly because not all the REP's assess these fees in the same way to its customers.

Basically, the TDU Fees consist of the various charges assessed by your local Transmission and Distribution Service Provider (TDSP, also known as the utility company) to transmit and deliver your electricity to your service address. The five TDSPs for the deregulated parts of the Texas energy grid are Oncor, CenterPoint, Texas-New Mexico Power, AEP North, or AEP Central.

Every single REP is charged TDU Fees and then passes them through to its customers, as they are assessed by the TDSP, but they are described to customers in different ways.

  • Some companies bundle the TDU Fees into the rate per kilowatt-hour (kWh) you are charged for your usage

  • Others companies list (or un-bundle) the TDU Fees separately from the rate per kWh you are charged by the REP.