One thing to understand about the Texas electricity market, is it's the largest one in the country, and 11th in the world when it comes to consumption. While the state politicians continue to argue over a solution for their rising energy costs, the closest thing to an answer they came up with was electricity.
What this does is allow customers in the state of Texas the power to choose their electricity provider. In the beginning this new law brought excitement and change to each city, and about 85% of the commercial energy customers switched their providers at least once. Then of course residential changes hit around 40%. These are quite astounding numbers, and it's hard to believe it took this long to make the change.
The new business startup was crazy considering any way you turned, there was a new company coming out of the woodwork. The competition was so fluent; the idea was that there would be much lower prices. The good news was this was offered through both residential and commercial areas. Oddly though, prices began to rise once deregulation was embraced by customers. It was so detrimental to the public, the electricity costs increased by over 40% in a three-year span between 2002 and 2004. The end result was residential homeowners and commercial business feeling treated badly as a result.
However, proponents of deregulation tried to explain the situation as best they could. The answer revolved around electricity prices rising due to natural gas obstacles. During this time the natural gas industry had reached an all time high and reached increases of 60%. So they were trying to tell us that deregulation was saving customers money.
The biggest issue that they tried to confront head-on was the misconception of immediate savings due to the vast amount of competition. While this was going on, there were several individuals still remaining skeptical about the situation. It was almost as if they were being sold a false bill by politicians and legislators. What it came down to is the economists and supporters of deregulation were right. Once we were able to stabilize the natural gas arena, electricity bills in Texas eventually started falling. By the summer of 2008 through the winter of 2009, these prices decreased by 30%.
Keep in mind, there are many experts out there attributing to this decline through the combination of the recession and the decline in natural gas costs. Eventually we expect the prices to keep falling the further into a recession we go. While everything looks sweet on the surface, it's forcing businesses to cut prices as well. The good news is they believe that the lower business electricity costs are helping them keep their businesses afloat until the economy turns around.