Unperturbed by blackouts and soaring prices in California and the recent collapse of Houston-based power trading giant Enron Corp., Texas plans to press ahead with electricity deregulation from Jan. 1.
Texas officials have consistently rejected any comparison with California and insist that the nation's second most populous state can make a success of deregulation.
“They prepared some two years to get ready for deregulation, and frankly, they were not ready,” said Thomas Noel, chairman of the Electric Reliability Council of Texas (ERCOT), which is responsible for keeping the lights on in the Lone Star State.
“We studied the issue for seven years and went at it much more deliberately,” Noel said.
Residential and commercial customers in Texas are now free to choose an electricity provider, much as they now choose their long-distance telephone service provider.
Prices charged by traditional electric utilities, which previously held a regional monopoly, have been frozen and competitors will be free to offer lower prices to win customers.
An electricity deregulation pilot program launched a few months ago showed that Texans appeared to be lukewarm about the idea of changing their electricity supplier, with less than 100,000 customers signing up out of some 250,000 eligible.
State officials are confident that the numbers of customers willing to switch will gradually rise. Implementation of the pilot program faced a series of delays because of technical glitches, but Noel said the system is now running smoothly and that there is also broad political support for the move to full-scale deregulation.
“At the last legislative oversight committee meeting, it was basically unanimous to move ahead. There were no people there arguing that we not move ahead,” he said.
Cities such as San Antonio and Austin, that are served by municipally-owned utilities, have opted out of deregulation for the time being but Noel expects them to sign on within a year.
In the meantime the fight for customers will center on the Houston and Dallas-Fort Worth areas, which until now have been supplied exclusively by units of Reliant Energy Inc. and TXU Corp.
The introduction of a competitive retail market is the second and final phase of electricity deregulation in Texas after the wholesale market was opened up to competition under legislation that was passed in 1995. The wholesale market has operated without major problems since then.
Among other things, wholesale deregulation led to a boom in the construction of new power plants, leaving Texas with a hefty surplus over and above its requirements, in sharp contrast to the situation in California where tight power supplies were a key contributor to that state's power crisis.
With the California power crisis still fresh in many people's minds, electricity deregulation in Texas will be watched closely by the rest of the nation.
So far 23 states and the District of Columbia have moved to deregulate their retail power markets.