Electricity Deregulation in Lubbock
Change is coming to Lubbock and how businesses and residents source their electricity. On February 22, 2022, the Lubbock City Council cast a unanimous vote in favor of electric deregulation, the final hurdle to transition to competitive electricity service. Lubbock will now join over 7 million Texas electricity customers with the right to choose their electricity provider.
Lubbock’s Electricity Deregulation
Texas’ First City to Opt for Competition
This all started way back in 1995 with the passage of Texas Senate Bill 7, which opened up the wholesale generation market to competition. This meant that power (electricity) generators could sell their electricity to any retail electricity provider who would then sell it to end-consumers. In 1999, the electricity market was officially deregulated in 1999 with the passage of House Bill 2606. This bill made it so that businesses and residents could choose their own electricity provider.
Texas House Bill 2606 did not apply to the state’s 72 city-owned electric utilities or the 75 electric cooperatives. Lubbock is the third-largest city in Texas (behind San Antonio and Austin) to maintain a regulated utility model. To date, none of the other 146 markets have opted into retail electricity competition.
Impact on Electricity Prices
In the years leading up to deregulation in the state, electricity prices in Texas were among the highest in the country. Since deregulation, prices have fallen significantly. Like any other product or service (e.g., mobile phone service), it is up to the consumer to make smart buying decisions or pursue calculated risks when selecting an electricity plan based on market conditions or short-term promotions.
For Lubbock, cost was one of the many reasons the city council decided to take this step and join ERCOT. In a recent study, the utility found that electric costs could drop an estimated $148.9 million annually for the city of Lubbock. Additionally, due to overall electric demand, if Lubbock remained disconnected from the ERCOT grid, the city would require a new power plant with an estimated cost of more than $700 million.
Other Consequence of Electricity Deregulation
One negative consequence has been higher prices during peak demand periods. This is because the deregulation of the wholesale market has led to a number of power plants being shut down. This has reduced the amount of power available during peak demand periods, which can lead to higher prices during spikes in demand, like during the 2021 winter storm.
Another potentially negative consequence of deregulation for consumers has been the creation of a number of deceptive plans that have resulted in “rate shock” cases where people have been caught off guard by their utility bill. These are cases in which consumers have been switched to a higher-priced electricity plan without their knowledge or consent. This has led to a number of consumer complaints and has damaged the reputation of the deregulation process.