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Deregulation and Atmos Energy

While most people understand that growing energy consumption is causing new concerns all the time, the need for more energy is always on the rise. The evolution of machinery from life-improving to life-enhancing is overwhelming us with new ways to use energy.

“Must-have” technology is being invented that will perform tasks our ancestors never needed to have done at all. One change in the way we handle energy use is the deregulation of electrical utilities in places like Texas. Now several years in effect, some of the results are becoming evident.

The Growth of Distributors

At the start of 2002, Texas instituted a law allowing electricity utilities to compete for customers in most parts of the state. As the largest electricity market in the United States, Texas was a natural place for such an experiment to take place. To level the playing field, a minimum price was established to keep the existing utility companies from charging artificially low prices and preventing new companies from competing fairly.

New companies could charge lower prices if possible but established companies could not. Since that time, Atmos Energy has grown to become the largest distributor of natural gas in the country.

Atmos Energy is headquartered in Dallas, Texas and has always been a Texas-based company. It built its first electrical generating plant in 2001. Atmos Energy attributes its growth to its ability to acquire utility assets from other companies.

While the reasoning behind the minimum price levels, called the price to beat (PTB) in the law, was to prevent existing monopolies from continuing their hold on the electrical market, the price setting may have helped Atmos Energy to grow to near-monopoly size.

Electricity can be generated by power plants using either coal or natural gas. The price of natural gas is much higher than coal. To establish that level playing field, the PTB was set using the cost of natural gas to generate electricity plus a fair profit margin. This is not a bad thing since the cheaper coal-burning plants are a burden on the environment. There is little doubt, however, that this law helped the growth of gas companies like Atmos Energy. There is no way to predict whether the outcome of deregulation will be good or bad, but it will pay to watch the growth of companies like Atmos Energy.

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