United States: Deregulation in Texas Experiencing Snags

Deregulation in Texas, which officially began Jan. 1, 2002, is off to a rocky start. Although the state began its pilot program in July to test-run deregulation, kinks are arising as consumers begin requesting service changes.

In exchange for the ability to shop around for an energy provider and to receive savings, consumers are experiencing service-switching mistakes, service interruptions, delays in customer service, incorrect data entries and delays in the time it takes to turn the lights on. As calls stream in, about 2% of all requests are mis-processed as customers switch service between electric companies.

Additionally, approximately 500,000 low-income families are not receiving the promised 10% to 20% rate discount mandated by the state's 1999 deregulation law. Apparently, incorrect or incomplete address information has led to a 47% error rate in matching eligible consumers with the discount.

One top official of the Texas power grid said some problems could be blamed on unfamiliar systems but others would become permanent fixtures. In the deregulated market, it will take technicians longer to process requests to stop or start electric service when customers move in or out of a home. Requests for new service must now make their way through the electricity grid operators' computers as well as the power providers' systems. For this reason, and because the new law has added additional procedures, customers conditioned to expect a one- or two-day turnaround should expect a minimum two- to five-day turnaround.

Texas began the two-step deregulation process in 1995 when it deregulated the wholesale-energy industry and the legislature passed the 1999 Texas Electric Choice Act, which provided the structure for deregulation at the retail level to begin January 1st.
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