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.
Photo credit: Flickr user, i5a