Electricity Deregulation Terms: A Glossary
An aggregator is an entity, such as a marketer or county, that pools multiple customers together to negotiate a transaction for electricity — both the purchase of the electricity itself and the transport (transmission and distribution) of the energy. These aggregators aim to use the buying power of more than one customer to achieve lower rates on electricity.
Cramming is an illegal practice that takes place when an electric provider adds charges to a customer’s energy bill for additional services without consent from the client.
Deregulation takes place when government takes a step back and allows greater freedom in an industry. Electricity deregulation in Texas resulted in a separation of the price of energy itself and the cost of transporting energy. Previous to deregulation, consumers paid both fees to their utility. After deregulation, retail electricity providers were able to sell electricity in an open, competitive market. Now consumers in deregulated areas can buy electricity from a retail electric provider, or REP, of their choice, while their utility is still in charge of the transmission and distribution of energy. Thus consumers now have the power to compare electric rates in Texas.
The journey of electricity from a substation to individual homes and businesses is referred to as distribution. Distribution lines are owned and maintained by utilities.
Electric Reliability Council of Texas (ERCOT)
ERCOT is the corporation in charge of Texas’ electrical power grid. When a consumer chooses to switch electricity providers, ERCOT sends the customer a postcard confirming the change.
Electricity facts label
All retail electric providers are required to provide an information sheet on the company. This sheet contains information such as contract terms, pricing, fees and renewable energy percentages.
Fixed rates are chosen by consumers at the beginning of their contracts. The customer and provider agree on a rate that is then locked in for the duration of the contract. This rate is immune to any fluctuations in the energy market.
Green energy, unlike regular energy, is made through means that don’t contribute to global warming. Typical energy is produced by burning fossil fuels such as oil and coal. These materials are becoming increasingly scarce and emit harmful gases when burned, so green energy is becoming more and more popular.
Some retail electric providers offer energy rates that are determined based on a specific equation using market prices for the generation and transport of energy.
Energy is billed in units known as kilowatt-hours. These units are equal to one kilowatt of electricity used per hour of time. A typical residential consumer generally uses a few hundred to a few thousand kilowatt-hours each month.
Public Utility Commission of Texas (PUC)
The PUC is a government body that oversees the regulation of electrical and telecommunication services in the state of Texas. In terms of the energy industry, the PUC supervises the transport of electricity and enforces the rights of the customer.
Retail electric provider (REP)
REPs buy energy from power plants and sell it to consumers at a variety of rates.
Slamming is the unauthorized switching of a customer’s electricity provider. This practice is illegal.
Transmission is the transport of electricity from a generation facility or power plant to a substation.
Utilities handle the transmission and distribution of electricity from generation plants to homes and businesses. Utilities own the power lines and are in charge of repairs in the event of a power outage. Consumers are assigned a utility based on their address.
Variable rates are prices per unit of energy. These rates change every month and are set by REPs based on market energy prices. Each month, prices for electricity are based on demand. Demand is influenced by numerous factors, including the weather and the costs for making energy and running power plants.