What is wholesale deregulation or wholesale competition? Wholesale competition expands the wholesale market and allows utilities to purchase energy from any and all available sources including non-traditional power sources such as independent power producers and power marketers.

What is retail deregulation or retail competition? Under retail deregulation, any entity would be permitted to sell power to any customer using the wires and equipment of your local utility. Retail competition is being suggested by non-traditional and non-regulated power generators as well as investor-owned utilities who want to sell directly to large energy users. They stand to make big profits from these sales. Large energy users are also proponents of retail access; they believe their rates would be lower. Retail competition has been adopted in states that have high energy costs. Texas, however, already enjoys rates that are below the national average.

Will costs be lower for all customers with retail competition? If retail competition is implemented, those on the less profitable side of the business may not fare as well. Homeowners and small businesses, who make up the majority of cooperative customers, may actually see an increase in rates and not the decrease promised by those endorsing retail competition.

Will rural areas be assured of long-term service with retail competition? In the 1930s, when the electric industry was unregulated, commercial companies had no financial incentives to provide power to those areas now served by cooperatives. In 2001, those areas are still far less profitable to serve. It’s unlikely that power providers in a retail marketplace will be racing to serve these residential and small-business customers. It’s also doubtful that companies will guarantee them long-term service.

Will utilities continue to improve their systems and to provide reliable service with retail deregulation? In the past, utilities made investments in generation and distribution infrastructure to provide the service required for their customers. In a highly competitive marketplace, some utilities might decide that preventive maintenance is an unnecessary expense.

What is retail restructuring? Under retail restructuring, any entity would be permitted to sell power to any customer using the wires and equipment of local utilities. Non-traditional and non-regulated power generators are seeking retail restructuring, because they want to sell their power directly to large energy users. These large energy users – refineries, chemical plants and steel mills, for example – believe that retail restructuring would lower their rates.

What is the co-ops’ position on restructuring? Co-ops have strong misgivings about restructuring, given the fact that it will probably prompt more regulation, not less. We recognize that on the surface, restructuring may appear to be a good thing, because, theoretically, it will give consumers the opportunity to choose their power provider. Co-ops are concerned that restructuring will favor large electricity consumers – industry and businesses, for example – that will be able to bargain for lower electric rate. Residential consumers may not have that bargaining power. Until lawmakers can guarantee that all consumers will benefit from restructuring, co-ops will remain skeptical.

Why wouldn’t costs be lower for all consumers in a restructured electric market? Electric co-ops traditionally serve farm and ranch families, homeowners, small businesses and other customers who are not the "cash cows" that big industrial users can be. Many providers are not particularly interested in serving this less-profitable side of the business. If providers are allowed to "cherry pick" the profitable customers, the typical co-op consumer may actually see an increase in rates and not the decrease promised by those advocating retail competition.

Will rural areas be assured of long-term service with retail restructuring? When the electric industry was unregulated in the 1930s, commercial companies had no financial incentive to provide power to those sparsely populated areas now served by cooperatives, which means that rural areas had to make do without electric power for decades after the lights had come on in towns and cities. Today, rural areas are still less profitable to serve. With retail competition, there’s no guarantee that anyone will want to serve residential and small-business customers traditionally served by co-ops.

How will restructuring affect reliability? Co-ops believe that any restructuring model should make reliability a fundamental component. Electric restructuring in other states has been the outgrowth of pressure to lower rates that are far above the national average, but in Texas, electric rates are below the national average. Since the electric system is not broken in Texas, the legislature should be deliberate in enacting legislation that could jeopardize the reliability of the state’s electric network.

How are electric co-ops positioned in the market today? Electric co-ops are competing right now in many service areas, but they are concerned that in a restructured industry they will be left with serving only the least-profitable consumers. The simple fact is that it costs more to serve rural and residential consumers. That’s why investor owned utilities were unwilling in the first place to serve them. If, in a restructured industry, IOUs are allowed to "cherry pick" large and lucrative consumers, then it will be increasingly difficult for rural, residential and small-business consumers to get reliable and affordable electric service.

How do co-ops work? Electric co-ops, which serve more than 3 million Texas customers, are owned by their member-consumers, who elect directors to govern their cooperatives. This direct control by local citizens ensures that each cooperative is dedicated to meeting the needs of its area and the members it serves.

Co-ops are different from investor-owned utilities in that they are not operated to generate a profit for shareholders. They were organized to provide a necessary service in areas that for-profit electric utilities declined to serve. Co-ops are locally owned and operated and are often the largest employer in the communities they serve.

What has been the experience of other states that have gone ahead with electric industry restructuring? Twenty four states have enacted restructuring legislation to date, and the promise of lower rates and the benefits of consumer choice have not materialized. In California, the Houston-based energy marketer Enron Corp. pulled out of the residential market only a few weeks after the state officially restructured. In Pennsylvania, consumers have not experienced the rate decrease that restructuring proponents touted. California, Pennsylvania, and New York also report cases of fraudulent electricity marketing.

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