Texas consumers pay more in deregulated electricity markets, study says

Outside the Diablo Canyon nuclear power plant at Avila Beach, California, U.S., on Friday, March 30, 2012. Photographer: David Paul Morris/Bloomberg
About 85 percent of Texans buy their electricity in a deregulated market.  David Paul Morris/Bloomberg

The average cost of electricity for Texans in Houston and other deregulated parts of the state exceeded the national average in 2014 for the first time in three years, according to a new report released Wednesday.

The 85 percent of Texans in deregulated parts of the state also pay nearly 15 percent more than Lone Star residents in integrated utilities, such as San Antonio and Austin, although the gap has narrowed, according to the annual Texas Coalition for Affordable Power report.

The Texas Legislature deregulated the electric market for most of the state in 2002 to create competition and allow residents to pick their own providers. Consumers can compare rates online at Powertochoose.org.

“Folks living in areas of Texas with electric deregulation have paid more for electricity, on average, than Texans living without deregulation — that’s just a historical fact,” said Jay Doegey, executive director for the coalition. “But it’s also true that the deregulated market is maturing. The good news for folks living in deregulated areas is that if they shop carefully, they can find plenty of individual deals with good prices.”

The coalition notes that there isn’t enough federal data currently available to properly compare 2015 costs.

In part because of Texas’ ample supply of cheap natural gas that helps drive power prices, Texas’ deregulated electricity costs sunk below the national average for the first times in 2012 and 2013.

However, that ended in 2014 when Texans in the deregulated market paid 12.59 cents per kilowatt hour compared to the 12.52 cents national average, the report stated. The 15 percent of Texans in regulated utilities paid just less than 11 cents per kilowatt hour.

The coalition said the “lost savings” between deregulated and regulated Texas markets adds up to $24 billion from 2002 through 2014, or $5,100 for a typical household.

The report gives multiple reasons for the potential divide — inefficiencies in the deregulated market, customer confusion about comparing rates in a complicated system, and higher prices from the legacy companies that remain from their regulated counterparts.

The costs charged by the transmission and distribution companies also have risen dramatically in the deregulated markets, the report contended. The Houston transmission provider, CenterPoint Energy, for instance, has increased its monthly charges from a monthly average of $24.61 in September 2003 up to $42.41 in March 2016. That’s not counting additional rate hikes that are currently pending.