What is Energy Deregulation and How Does It Work for Consumers?

Rhythm Research Team
Rhythm Research Team on Wednesday, June 19, 2024
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What is Energy Deregulation and How Does It Work for Consumers?

Throughout much of the history of electricity use in the United States, residents and businesses bought their power directly from a local energy utility company. This changed around a quarter of a century ago, so that now people in many states must choose an electricity provider – meaning that you have more options when it comes to the rate you pay, better terms for contracts, specialized product offerings, and improved customer service. Read on to learn how energy deregulation came about, and how to navigate your choices when it comes to service providers.

What Is Deregulated Energy?

In a deregulated energy landscape, retail electricity providers purchase energy needed from the utility company, based on projected use by their customers. Energy still comes through the utility and its transmission infrastructure, but the providers compete against each other to offer the best rates and services to potential customers.

History of Energy Deregulation in Texas

This wasn’t always the case. When America’s electrical grid was first built, energy utilities competed for customers directly. As demand increased, the utilities constructed larger power plants, helping keep prices down. But there was no uniform way to deliver electricity nationwide, and as more and more people came onto the grid, key infrastructure and existing power plants struggled to keep up, resulting in spotty service and often-fluctuating prices. By the early 1930s, three major utility holding companies controlled nearly half of the energy used nationwide, effectively making them monopolies.

The federal government passed the Public Utility Holding Company Act (PUHCA) in 1935, to regulate these utilities and push back against the monopolization of energy production and transmission. Then, thirty years later, disaster struck: the Great Northeast Blackout of 1965, when a faulty relay on a transmission line failed, and 30 million people in the U.S. and Canada were without power for 13 hours.

1977 saw the founding of the Federal Energy Regulatory Commission (FERC), which took the bold step of deregulating the energy industry, leaving it in the hands of individual states to choose their preferred way to bring energy to their residents. In states that elected to deregulate, the utility companies still owned the energy delivery infrastructure, but retail electricity providers sprang up to offer customers plans designed to suit their demand and their budgets.

Blog image Choosing Electricity Texas Guide New Residents

In 1999, Texas voted to deregulate its energy market, with the law taking effect in 2002. Today, there are more than 130 REPs in the Lone Star State, all of which are registered with the Public Utility Commission, which oversees how they sell power as well as how the Electricity Reliability Commission of Texas (ERCOT) operates the grid. The intent was to lower costs for customers, give them more control and choice when it comes to how they buy electricity. And it’s worked.

Benefits of a Deregulated Energy Market

Competition is at the heart of deregulation, as each retail electricity provider works to attract and retain customers.

  • Increasing local competition by having more providers to select from

  • Encouraging providers to provide tailored plans, better contract terms, and flexible payment options

  • Improving customer service from providers

  • Incentivizing energy efficiency in both providers and their customers

  • Promoting greater transparency and access to plan information, so customers can make informed choices

  • Making it easier to switch electric companies.

For a deeper dive into the benefits of deregulation for Texas customers, read our article on Energy Deregulation in Texas.

How to Choose a Retail Electricity Provider

When exploring options for a retail electricity provider, you want to be able to compare apples to apples. Here is a good starting point of factors to consider:

  • Types of Plans: Providers offer fixed-rate plans, which bring price stability to your monthly bill, and variable-rate plans, where the price of energy goes up or down based on market conditions.

  • Length of Contract: Contract lengths can range from month-to-month to multi-year agreements, with rates typically lower in a longer contract . Select a term that lines up with your lifestyle and budget.

  • Pricing and Fees: Carefully review the pricing structure and any associated fees that the provider charges. At Rhythm Energy, transparency in pricing is important to us! We never charge hidden fees or work complex terms into our contracts.

  • Renewable Energy Options: If sustainability is important to you, look for providers with a strong commitment to renewable energy, as well as solar buyback programs, green energy plans, and more. Rhythm Energy only offers 100% renewable energy plans, including Solar Electricity Plans and Texas Wind Energy Plans.

  • Innovative Products: Does an energy provider offer innovative products and services to help you optimize your energy usage? At Rhythm Energy, we have created innovative plans such as those designed for electric vehicle owners and home protection plans that suit your lifestyle.

  • Reputation and Reviews: Read customer reviews to determine the reputation of a potential provider. A track record of exceptional customer service and support should be a priority, so you know that you’re working with a provider you can trust. At Rhythm Energy, we have a nearly-perfect rating on Google and hundreds of reviews from happy customers.

Want to know more about how to choose the right retail electricity provider? Check out our article How to Choose the Best Electricity Plan in a Deregulated Texas Market.

How Rhythm Energy Helps Customers Navigate Deregulation

Rhythm Energy brings you options to match your values and needs. Our team of energy experts is committed to providing you with fair and transparent pricing, best-in-class customer care, and renewable and innovative products that provide customers with a near-five-star experience.

All Green Energy

Renewable energy generation and transmission is one of the most important tools to combat climate change, so we only offer plans that are 100% renewable, including solar and wind energy.

Always Transparent

Some of our competitors charge up to 18 different hidden fees, written into the fine print of their contracts. That’s simply not how we do business – we keep things simple and straightforward, charging no hidden fees, ever.

Customer Obsessed

Our industry has historically not treated people well, and we’re out to change that. So we offer customer service that truly cares, and is available seven days a week in case you need us. Our service, combined with our reliability, is why we receive so many positive reviews.

Helping You with Next Steps toward Sustainability

At Rhythm, we also offer a free solar and battery storage concierge service, to help you determine if solar is right for your home. Our unbiased concierge service can help you save thousands by ensuring you have the perfect solar and battery storage system, installer, and quote. Learn more about our Solar Concierge Service.


What is energy deregulation?

Designed to keep energy companies from serving as monopolies, deregulation is a means to increase competition among electricity providers and improve options for customers. The decision on whether or not to deregulate is made at the state level, with Texas voting to do so starting in 2002.

How does energy deregulation affect my electricity choices?

You must choose a retail electricity provider (REP) to deliver your energy to your home or business. The energy is still generated and transmitted by the utility company, but REPs purchase power from these utilities and offer you plans and pricing designed to attract you as a customer.

What are the benefits of energy deregulation?

Better options for plans and pricing, ranging from the rate you pay for electricity to the type and length of contract that you sign with your REP. The competitive nature of the marketplace also encourages REPs to enhance their customer service and innovative product offerings, in order to win your business.

How do I choose an electricity provider in a deregulated market?

Compare plans and prices. Read customer reviews. Look out for hidden fees. And if renewable energy is important to you, then look for a provider like Rhythm Energy, which only offers 100% renewable energy plans.

What role does the Public Utility Commission of Texas play in deregulation?

The Public Utility Commission of Texas (PUCT) is a branch of the state government that adopts the rules which companies must follow in many parts of the electricity, water, sewer, and telecommunications industries. The PUCT does not set the final price of electricity charged by retail electric providers, but it does set the delivery charges paid for the poles and wires that carry electricity from the generator to the consumer.

Categories: Electricity 101
Tagged: rhythm-marketing, energy, deregulated, renewable, electricity
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