Texas is the largest electricity market in the country and incredibly ranks 11th in the world when it comes to consumption. For years the politicians in the Lone Star State had been be arguing about a solution to rising energy costs for homes and businesses. Then in 2002, the Texas Senate passed a law that called for electricity deregulation.

If you’re not familiar with how deregulation works, it’s simply a way for residential and commercial owners to choose their electricity service provider (ESP). Hearing about all the benefits upfront gave customers a new light to saving more money on their bill. It was so popular in the beginning, 85% of the commercial customer’s switched carriers, while residential owners produced another 40%.

The early evidence was auspicious as a number of new firms entered the market. It appeared as if the increased competition from deregulation would lower prices. In the two years after deregulation, more than 60 startup firms entered the Texas electricity market. These new firms served both residential and commercial areas.

However, shortly after deregulation was embraced by customers, energy prices steadily began to rise. According to one source, the average customer’s electricity bill rose by over 40% from 2002 to 2004. This left many Texans feeling cheated and there was a new campaign to repeal deregulation.

Proponents of deregulation tried desperately to explain the situation. They claimed that electricity prices were increasing because energy costs for natural gas, an important power plant fuel, had reached an all time high. In fact, in the same period that electricity prices had gone up by 40 percent, natural gas prices had gone up by more than 60 percent, which means that deregulation actually ended up 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.

In the end, the economists and supporters were right. As soon as the cost of natural gas stabilized and later declined, electricity bills in Texas fell across the state. In fact, from the summer of 2008 to the winter of 2009, power prices in Texas declined by nearly 30 percent.

Unfortunately the debate continues, and others are expressing their concerns about these benefits only happening because of the recession mixed in with the current natural gas costs. The truth is, the further into the recession we go, the lower the prices will go.

These falling prices have been a great boon to businesses in Texas who have been forced to cut prices and tighten their in the midst of the worsening recession. In fact, many small business owners claim that lower electricity costs are at least partially responsible for helping them keep afloat.