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The Verdict Is Still Out On Texas Electricity Deregulation

The Verdict Is Still Out On Texas Electricity Deregulation

 

Texas deregulated its electricity market 10 years ago. Greentech Media calls it the “oldest and most successful deregulated electricity marketplace in the U.S.” It’s certainly the oldest, but is it really the most successful?

The Greentech Media article trots out rosy statistics, such as the increase in renewable energy, which increased from one percent in 2002 to over 8.5 percent last year. Wind grew 10 times over, from 2.6 million megawatt hours (mWh) to 26 million mWh. Texas has over 10,000 megawatts (MW) of installed wind capacity, more than all other states. I am all for increasing renewable energy, and Texas should be proud that it leads the U.S. in installed wind capacity.

The article also cites the fact that by 2008, 80 percent of registered Texas voters “favored a competitive electricity market, and by 2010, 55 percent of residential customers had selected a competitive retail electricity provider or product.” Okay, Texas voters favor a competitive electricity market, but does that mean deregulation has brought lower electricity prices?

Not according to a report released last year, which stated that prices above the national average in Texas cost residential consumers $11.5 billion since deregulation began in 2002. The added cost to all consumers (residential, commercial and industrial) is even greater. The average residential price of electricity in deregulated areas in Texas was up to 42 percent above the national average. That doesn’t sound very successful to me, particularly during the greatest economic crisis since the Great Depression.

A 2009 report on Texas electricity deregulation by McCullough Research found that “lower rates, the fundamental promise of deregulation, have never been realized.” The report found that the average electricity rates in deregulated areas “far outpaced rates in the 25 percent of Texas not deregulated, and in neighboring states that are equally dependent on natural gas.”

The report also claims that residential electricity prices in Texas increased 64 percent since 1999. The report attributes the rate increases to “the cumulative effect of deregulated rates increases is staggering for Texas households and the state’s economy.”

Both reports make recommendations to improve the system. The 2009 report recommends a simple improvement: more transparency. The report cites the Australian market as an example. The Australian market requires disclosure of market information within two days. In 2007, Texas required disclosure within 60 days. The report recommends two days, which would save Texas electricity customers $956 million a year, or about $52 on an average annual household electricity bill.

It seems that saving money these days is a good thing when some folks are struggling just to survive. The amount that can be saved, according to the 2009 report, might seem small to some, but to a family barely making it, every bit counts.

 

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Photo credit: Flickr user, i5a

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19 comments

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7:13AM PST on Feb 21, 2012

This seems like such a phenomenal no-brainer to me. When you have to ADD a Profit Motive into a utility, how exactly is it supposed to cost LESS?

3:22AM PST on Feb 18, 2012

Conservatives say that privatization is efficient. This claim is unassailably false. The Arizona Department of Corrections reported in its 2010 “Operating Per Capita Cost Report” that inmates in private prisons can cost as much as $1,600 more per year. And more generally, the privatization of public institutions and programs, a policy that has been pursued aggressively since the early 1980s, is predicated on the assumption that extending the reach of markets will promote economic growth and will cut costs. Again, this claim is unimpeachably false. In 2003 the World Commission on the Social Dimension of Globalization’s issued a report entitled “A Fair Globalization” whose authors found that the primary achievement of the privatization of public assets, institutions, and programs since the early 1980s has been redistributive, not generative. Reagan’s chief justification for the privatization of myriad public sector jobs was, in his words, “to stimulate capital accumulation.” But such rhetoric strays far afield from reality. Throughout the 1960s aggregate global growth rates stood at 3.5% and during the 1970’s they dipped to 2.4%. But from 1980-2003 the world economy has only grown by a rate of 1.25% annually. So privatization didn’t appear very generative, but it did redistribute wealth upward.

10:45PM PST on Feb 17, 2012

I'll vouch for the article. It's bad and I blame Perry and the repuglican majority here. Their fat pockets are the biggest magnets compared to other politicians when it comes to bribery from energy corporations' payola. My electric bills have been horrendous, especially just this last summer when we had record heat waves & droughts. My neighbors had it worse as most of them must either have more difficulty withstanding controlling their thermostats or else their homes aren't too well insulated. I also have more trees around my house than most of my neighbors. But it is bad no matter what anyone has going for them.

5:00PM PST on Feb 17, 2012

Is this another Enron in the making?

4:58PM PST on Feb 17, 2012

Thanks. Concur.

4:56PM PST on Feb 17, 2012

Deregulation has yet to show it benefits anyone but the companies asking for it. Same goes for the banking industry....

12:33PM PST on Feb 17, 2012

Thank you for the article...

12:24PM PST on Feb 17, 2012

Prior to electricity deregulation in Alberta, Canada, my electricity bill was consistently UNDER $25 per month.

My electricity needs have not changed. But with deregulation, came extra "riders" and "line fees" and "administration charges".

I still only use about $25 worth of electricity per month... But I pay closer to $125 once all the BS "fees" are added in.

Suffice to say, the sooner I can generate ALL my own power, I'll be saying a big old "up your's!" to the electricity company!

12:24PM PST on Feb 17, 2012

Thanks

11:47AM PST on Feb 17, 2012

Wow. Seems like a shinning example of why not to deregulate. Seems if the market does'nt get you, your politicans will.

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