2010 Data. Source: United States Energy Information Administration
Is the deregulated electricity market finally paying off for Texas consumers? After all, average prices statewide have come down since 2008. Consumer complaints also are falling. Doesn’t that mean that success has arrived at last?
Unfortunately, the answer is “not yet.” As noted earlier on the Recharge Ratepayer Report, complaints are down but still remain well above pre-deregulation levels. A quick look at the relevant data also reveals that those of us living in deregulated areas continue getting the short-end of the stick when it comes to what we pay to light our homes. Fact is, if you live in a deregulated area, you’ve probably paid thousands of dollars more for electricity than your friends or relatives who also live in Texas, but outside deregulation.
How do we know this? The United States Energy Information Administration, a federal agency that collects information on the nation’s electricity and natural gas markets, recently released detailed pricing data for 2010. The US EIA confirms that average electricity prices are down overall, but also confirms that Texans in deregulated areas continued paying substantially more for electricity than Texans outside deregulation.
In 2010, the Texans who received power from providers exempted from deregulation — that is, from municipally-owned utilities, electric cooperatives, or still regulated investor-owned utilities — paid on average 10 cents per kilowatt/hour. By contrast, the average price paid by Texans receiving power from retail electric providers in the deregulated system was 12.8 cents. That’s 28 percent higher.
The US EIA also reveals that Texans under electric deregulation have paid higher average prices than Texans served by providers exempt from deregulation for every calendar year since the implementation of the law. The differential was bad in 2002, the first year of retail electric competition, but it was three times worse in 2010.
Also consider that a typical consumer paying average prices in a deregulated area has shelled out about $3,100 more over the last nine years than a Texan using the same amount of electricity, but paying average prices outside deregulation.
Ouch.
I don’t highlight these facts to promote reregulation. That’s not going to happen in Texas. But I think it’s important that we work toward policies to make electricity more affordable for all Texans, whether living inside or outside deregulated areas. We need this system to work. That means pursuing policies that help Texans shop for electricity, that bring more transparency to the market (check out our proposal for “standard offer products” ), and that discourage anti-competitive activity.
You can read more at the Recharge Ratepayer Report.
It is important to point out that in areas of deregulation, businesses no longer subsidize the costs of serving residential loads. So, there will always be a higher costs to residential loads post deregulation.
It looks to me that prices are realigning in the deregulated areas, though regulated areas are still subsidized.
The average cost in deregulated areas are skewed upwards by consumers who don’t take the time to shop around for the best rates. The powertochoose website lists current fixed price offers below the regulated average of 10 cent/kwh in every part of the deregulated retail market.
If every customer would take 15-30 minutes per year to seek out a better deal, the average cost would drop (but only in the deregulated areas, in the regulated areas you have to trust your utility to keep your best interests in mind).
But keep in mind that many folks in deregulated areas — perhaps most — cannot avail themselves of the lowest-cost offers without breaking their existing contracts. That there are lower-cost offers available on the powertochoose website does not mean these offers are available to everybody at any given time. It’s also troubling that the differential between what folks are paying in deregulated areas and areas outside deregulation is much worse in 2010 than it was in 2002, when we began this process.
Customers cannot avail themselves to the lowest-cost offers without breaking contracts? That seems illogical on several levels:
1.) Deregulation has been in place for almost a decade now, so at some point all customers have had the opportunity to shop and find the lowest possible deals
2.) For many people, the cost of breaking a contract would be cheaper than what they would pay out to complete their term.
The fact of the matter is that information from the EIA is skewed. As Mike above said, it includes the people who are still paying high rates with incumbent providers and who don’t leverage the market into their comparisons of regulated and deregulated areas.
Per the PUC, the difference in bills between regulated and deregulated areas in September was literally a few dollars for the same usage, and that is including people paying elevated prices because they’ve never shopped for deals in the deregulated market.
At the end of the day, customers in deregulated areas have choice. Customers in places like El Paso, who have a bill 25% higher than the average bill for customers in deregulated areas of Texas, do not have the choice to shop around and find a better deal.