Has Electric Deregulation Helped or Hurt Texans?
Since 1999, when then-Gov. George Bush signed a law that deregulated the Texas electricity market, a debate has raged about whether and how much the move has benefited ordinary Texans.
Deregulation aimed to introduce market competition as a way to increase options to consumers and force down prices. Clearly, the ramifications hardly have broken down so simply, and some believe the industry and large industrial customers have benefited more than the workaday electric consumer — who generally pays rates higher than the national average. Last week, the Legislature's Sunset Advisory Commission, which is currently evaluating the Public Utility Commission and ...
Comments (34)
eyeswideopen
Deregulation of the energy sector was the brainchild of Ken Lay at Enron for the sole purpose of manipulating the market. Whoever controls the production controls everything else and can set prices.
Lay sold this program to close friend, Texas Governor George Bush, who sold it to Lt. Gov. Rick Perry, who then got Sen. David Sibley to gather votes. The rest is history. KKR bought TXU in the largest leveage buyout ever.
They then spent $13M in throw around money through lobbyists to insure that they got everything they wanted, which was no regulation whatsoever. Couple this with the fact that the PUC appointees have always been Bush and Perry puppets and you have a perfect storm as far as screwing the consumer goes.
Since natural gas prices are down, the average price per kwh currently looks pretty good, but as pointed out, we are still higher than most regulated states, and we always will be. This extra money goes directly into the pockets of the companies who are producing electricity.
Industry mouthpieces would have you believe differently. They tell us that we use more of the expensive natural gas here to produce, but if you look at Louisiana, who uses the same mix of coal, natural gas and nuclear power we do, you will see that they average prices per kwh almost 30% less than ours.
Forget about how burdensome it is to :"shop" for electricity ... which it is; forget about the fact that natural gas prices are down right now ....which has dropped monthly bills into the managable level; but remember that history will show you that when you allow wolves to roam free and unhindered they are going to do what is best for the wolves. You will have more packs of wolves move into the deregulated territory, but the outcome will be the same for the rabbits.
We rabbits will always need someone in Austin to manage the wolves. Right now, there is no one. Our governor is even dressed up in Little Red Riding Hood's clothes.
psymetric
I just went through the process of choosing an electricity provider for the first time, and in the end, I made a choice, but I did not like the process. I am all for competition, but competition only works when people can make informed choices. When I went to the powertochoose.org website, I was presented with well over 200 "offers" for my address. How can one evaluate that many plans? It would be much better if the Public Utility Commission established a relatively small number of standard plans (say less than 20) that were based on the variables that enter into an evaluation of a plan such as contract vs month-to-month, degree of renewable energy included, customer satisfaction, contract length, etc. Then let the companies compete on a kilowatt cost basis on each plan. That would provide consumers with an understandable group of plans and force providers to compete head-to-head on price rather than on their ability to lure consumers into making a choice on extraneous factors.
JRog
I was wondering if you looked at quality of service differences pre- and post- deregulation or in regulated vs deregulated states. I'd be curious to know if there are any measurable differences and if they could be correlated to the existence of regulation. Say, for instance, number of blackouts (I don't really know what the proper criteria would be).
eyeswideopen
The service is the same as always, GRog. Nothing has changed as far as delivering and maintaining the service goes. They just changed the name to ONCOR.
I would also point out that every customer in deregulated areas are paying over $300 which allows ONCOR to get rid of all the payroll for meter readers. They save the money, but we get charged for it. The citizens of Austin aren't being charged a cent for their new meters because they are not in the deregualted market and the city owned utiltiy company knows that there will be a savings on the operational end. Our PUC knows this but gave ONCOR this windfall anyway because they knew no one was paying attention. Certainly not our elected officials who are in bed with the utitlities.
JRog
@eyeswideopen
Well I've lived in deregulated areas and I have never paid over $300/mo as a rule, so something is missing from your analysis there.
Are service interruptions more prevalent in one area or the other? Blackouts? Time it takes to have a technician fix a problem or establish new service? These are things that cannot be answered with anecdotal stories I don't think. I appreciate your personal experience, but my question is a little broader.
eyeswideopen
We'll let's reduce to lowest denominator..... if you pay $300 here, you would be paying a little over $200 if you lived in Louisiana, with all other factors being the same.
If you live in Austin (not in deregulated market), you would not be paying $300 for a new Smart Meter. If you live in Houston, Dallas or other deregulated areas you do.
Service in deregulated markets has not changed with regards to transmission and maintenance, yet when ONCOR jumped the gun and bought the wrong type of new Smart Meter before our PUC had approved it, our PUC allowed ONCOR to charge us millions of dollars for the ones that could not be used.
Do you want me to keep going? Is this simple enough for you? Not too anecdotal?
Pull your head out of the sand.
JRog
@eyeswideopen
Leave it to you to start with the rudeness.
How do you know provision and maintenance hasn't changed AT ALL? Do you have statistics on number of outages or average wait for a technician? If so, I'm all ears. If not, you aren't telling me anything. Cite sources, give me something. I have no reason to take your word for it.
Irene Solnik via Texas Tribune on Facebook
HURT!!!!!!!!!!!!!
Jacquelyn Boyet via Texas Tribune on Facebook
I dunno, I pay less now than my parents did for electricity 20 years ago.
Michael Kjar via Texas Tribune on Facebook
I'll take municipal-owned CPS here in San Antonio any day over "competition." Lowest rates in TX, diversified energy sources, good management, city oversight, and payments to the city that keep property taxes down. And they have an innovative program to manage peak usage--I participate in it.
eyeswideopen
JRog....you're kidding right? As far as I know, we have never had a rolling power outage in Texas....either before of after deregulation. We had complaints about lack of service after hurricanes and snow & ice storms before and after deregulation. We have problems now with ONCOR refusing to pay to replace ruined household appliances and personal electronic equipment after admitting to causing massive power surges though a couple of homes. These type of things also happened before dereg.
If today you live in Claremore, OK you would be paying 6.7 cents per kwh hour. If you were in Baton Rouge, LA your rate would be almost 30% lower. There is nothing different about the electricity coming out of a socket in OK, LA or TX, so why are you paying almost $100 more per month than you should be? The answer is .... you shouldn't.
Based on your questions and responses, I would say that you either have more money than you need, which most Texans don't have, or you work for a segment of the market involved with electricity and make your living off of the rest of us. Which is it?
JRog
Well eyeswideopen, I am a law student paying for school through loans and scholarships, so you are once again mistaken.
I'm not sure how you would gather anything about my background from my questions that asked if there was any "measurable difference in quality of service pre- and post- deregulation or in states with and without regulation." Then I provided some examples of metrics of measurement. Then I asked for quantitative analysis and sources for information. Yet, you continue to talk about price and espouse a clearly biased view.
All I ever asked for was information to make an informed opinion on this issue. I'm still waiting. The price difference has been clearly established. That point is made. If you want to talk about things besides price, like I asked for, I appreciate your help. If you want to continue to take cheap shots at me as an individual, this will be my last response to you. Thanks.
eyeswideopen
Well, my first question would be, if you are working and paying your way through law school, how do you afford to pay $300 per month for electricity? My next question would be, were you paying an electricity bill before deregulation came into being?
My next statement to you is going to be this .... the transmission and production of electricity are still regulated by ERCOT. They are not associated in any shape, form or fashion with the group that is deregulated...those being the power generators and retailers. I believe this makes all your previous questions moot with regards to the Texas Tribune piece we are all commenting on.
Has deregulation helped or hurt Texans? Obviously, it hasn't hurt you since you don't care that you pay $100 more a month than you should be. Most Texans can't say that.
JRog
Sigh.
I quite specifically said that I had never had to pay $300 or more at any point for my electricity. Why do you continue to make this about me? I asked a simple question.
If prices are higher, how is the quality of service compared to states where they are lower? It is not a moot point in any way, shape or form. If customers receive more reliable service, better quality service then perhaps that should be considered when evaluating the price difference. If you don't have any data on this question, then we have nothing else to talk about.
eyeswideopen
JRog ..... I think I've made my point. Service is the same as it has always been, but I'm 60 and you haven't even been out in the real world yet, so there's not a whole lot of "history" there for you.
Let me put it another way ....if all things are the same now except for the fact that we have gone from having one of the lowest costs per kwh in the U.S. to one of the highest, is this good for Texans? Where does the extra 25 to 30% go? I think that everyone who answers these questions will post the same answers unless they make their living off of the production, transmission and sale of electricity, are lobbying for them, or are so young they don't remember what it was like before deregulation came into being here in Texas. Since you fall into the later category, taking this any further with you is truly moot.
JRog
eyeswideopen
So service is the same as its always been...based solely on your 60 years of experience and no factual observations at all. Got it.
Anyone else want to provide any FACTS comparing and contrasting the quality of service in the 15 deregulated states versus the 35 regulated states? Has anyone done any research in this area? Are there any studies available?
eyeswideopen
Here's one for you to start with and get up to speed. All you need to do is goggle "deregulated electricity states" if you want more.
http://www.usatoday.com/money/industries/energy/2007-08-09-power-prices_n.htm
This is not rocket science. We have coal, wind, nuclear and natural gas produced electricity in Texas. We have it all. We produce more natural gas than any state in the U.S., yet our rates go up 30% with deregulation. Nothing changes Mr. Law Student. Forget about other states entirely. Let's not even bring them into the equation. Nothing changes except the cost we pay per kwh. Where does the money go? Don't tell me to build new plants because we are shutting down old ones, and with wind coming onboard, don't even need any new ones for years according to published reports.
Where does the money go, JRog? Where does the extra $100 go? Is yours wrapped up in a little pink bow that my brother-in-law doesn't get up in Oklahoma? Mine isn't either. Does the elec coming out of your sockets have a better odor? Go further? Mine neither. Everything is the same, except the cost.
Has deregulation helped Texans? Just give me a "yes" or a "no", counselor.
jkirk
Last year I spent at least 6 hours on the computer selecting the best electricity deal, researching the companies I chose to compare, etc . I'm retired; I've got the time. During that process, several questions occurred to me: what if I didn't have a computer? What if I weren't able to read well? Most people need electricity in their homes, just as they need water. I suspect there is a group paying through the nose for what should most likely be a "public utility" but isn't.
Diane Owens via Texas Tribune on Facebook
Wish we knew one way or the other. We never got deregulation in Austin unless you are talking about deregulation of electric co-ops. PEC members found out the hard way that no one was watching while the former PEC CEO and Board used members payments as their personal cash cow.
JohnJohnson
JKirk ..... I have an 18 month contract with Champion. The Fort Worth Star Telegram also showed them, after evaluation, to be one of the best, if not the best, with regards to both rates and service.
It is sad that we have to sort though all the garbage to find someone we can trust and depend on. It is hard for the elderly to make changes and shop for service on computers they don't have or know how to use.
All these so-called retail providers are middlemen that just add cost to each kwh we buy. They don't produce electricity; they don't transmit electricity; they just buy and resell at a higher price. Each city should be able to buy at a wholesale price and sell to the citizens living within their city limits. I know that a group has been formed called Cities Aggregate Power Project that proposes being able to do this. I believe that over 100 Texas municipalities have signed up. For some reason, our legislators are dragging their feet on allowing this to happen.
Calls need to be made to each of our state elected officials to let them know how we feel.
They need to divorce the electricity lobbyists and start listening to us for a change. First, we have to let them know what we expect. Right now, they think we are not paying attention, and, for the most part, they are right.
jkirk
John Johnson
Well said.
And surprise, surprise, Champion is the one I ended up with and have been pleased with.
That said, it took us both some time and skill didn't it? And access to a computer. And paying attention. But I do hope that at least a little something can be done.....if there are enough of us who can pay attention......
scott
Kate, I think you missed the bar a bit. Of course, you keep talking to the industry insiders, don't be surprised you're getting duped. And to JRog, man, you don't deserve to graduate from law school.
First off, let's talk basic economics. There is not a "free market" there are 3 markets. There is a free market, the principle feature being both competition and alternatives. In the free market the customer is always right.
Next, my Juris, junior, we have professional markets. Here there are no alternatives, the profession has a monopoly on that particular service (only lawyers can practice law, only doctors medicine...) Ben Franklin said, "a country boy between two lawyers is like a fish between two cats." The professional must defer his interests to the client/principal. Finally, due to the expertise which is the service sold, a customer in the professional market, can't know if he is right, or well served.
Lastly, there is the monopoly/utility market. These markets are vastly different from others--there is no alternative to water, electricity, roads and other utilities, nor is there any competition. It was wrongly stated that we deregulated our power generation--this isn't the case, can't be as any generation of electricity goes into the larger grid and is indistinguishable from other kWh.
These markets are unique in other ways. These power plants are essentially commissioned by state, the state determines the volts, amps and other specs. The gov't uses it's eminent domain powers to provide land and easements, funds the projects with guarantees, bonds and other sureties.
In addition to the subsidies and governmental supports, externalities also come into play. These markets are uniquely polluting, and manage vast resources and waste. These externalities represent another unique feature of these markets.
Finally, demand in these markets is absolute and must be managed--we don't really get to choose electricity, water and these other essential services. In many markets, commissions are appropriate and earned, but not in these markets--selling electricity is like selling ice, not in the Arctic, but in the desert. This means that the market will bear any price.
There is nothing free about these markets. It makes no sense to have competing powerlines, water and sewage lines. These are special markets, and any comparison of these utilities with free-markets is a perversion of the term. "Deregulation" is a sophistic term for manipulation of markets that are primed from manipulation. The essential nature of these goods/services means that we will pay whatever they demand.
elemming
This is an almost epic FAIL article.
Instead of mostly talking to the electric providers, the politicians who planned and profited from this and large businesses, where providers compete for their business, more talk with groups representing consumers and more comparisons with other states show this deregulation is an obvious failure.
AARP has just released a study showing deregulation has failed seniors in Texas. It has failed all individual consumers and just created a market that isn't free but marketers can impose their costs and marketing strategies on a regulated product.
revolver1973
Deregulation has clearly been a success, by any objective measure. One key metric is to look at the profit margins on a typical deal. These have been compressed due to competition. Natural gas will always establish relative market rates, but the profit on top of that is where REPs are forced to compete. They compete by being more efficient, managing risk and credit better than their peers, and constructing better products.
As a consultant for the past 9 years, we believe that the market has seen its share of issues. However, there are great REPs out there that are very competitive and offer immense value if you understand how to leverage the market to your advantage.
That being said, I do agree that there could be more done to educate the residential market on how the market works. Much of the funding that was to go towards education was reallocated for other purposes early on in deregulation.
St. Clair Newbern IV
President
Live Energy Inc
http://www.liveenergy.com
eyeswideopen
Mr. Newbern, you have no credibility with me, nor, I would hope, with others. You make your money from the people who are gouging us. You are paid to do exactly what you are doing here.....spit out propaganda.
When reading your take on things, I am reminded of the words to an old song...."You going to believe me or your lying eyes?"
Every independent study, and Texans' monthly bills, indicate that we have been "rode hard and put up wet".
Louisiana produces a kwh using the same mix of fuels we do .... coal, nuclear fusion and natural gas and we pay 26% more. You guys keep telling us it is because we are growing faster than Louisiana and having to build new plants. Bull! We are shutting old plants and not building that many new ones. One independent report has us not needing to build any new plants in the forseeable future with wind coming onboard.
Only 20 states in the U.S. pay more for a kwh than we do. Before deregulation, 33 states had higher rates.
The pseudo retailers you tout so highly are unneeded middlemen who neither produce, transmit, or repair equipment and lines. They just add expense to the equation. Anyone who can post a $100K bond can become a "retail provider". What a joke!
I could go on and on and talk about the marginal fuel license to steal, and how we paid for both nuclear plants in the state several times over, but you get my drift.
Ken Lay and his band of crooks started all this, and because it is so easy to buy off politicians and consultants, we will be paying more than we should for a long, long time.
revolver1973
eyeswideopen,
You clearly have strong opinions. Could you tell us who you are, and what company you work for?
My comments are based on a deep understanding of the market, having worked in it every day since it opened in 2002. I represent commercial and industrial clients, and am very familiar with all the REPs in the market. My opinion is that if we were still a regulated market, our costs would be higher than the market rates being offered today.
We clearly have quite different perspectives on life, and the economy that we live in. You refer to those of us who compete for business as "wolves", and refer to yourself as a rabbit. This is interesting. The way I see it, government is more wolf-like than free market capitalists like myself, and I sure don't see my self as a rabbit who needs the protection of the government.
Everyone has a right to their opinion. I stand firm in my opinion that free markets are always preferable to government monopoly, and the deregulated Texas market is a perfect example of this proving out in the marketplace.
St. Clair Newbern IV
President
Live Energy Inc
http://www.liveenergy.com
eyeswideopen
I am an independent businessman who works out of his home office. I make nary a cent from anything having to do with the electricity....and you bet that I am fired up and opinionated. I have studied this issue going all the way back to '06. I watched key Texas senate and house committee meetings on the subject. I talked with elected officials and I conversed with the head of our PUC, Barry Smitherman. I read everything I could on the subject and I watched KKR/TXU buy every vote they needed. I know what I am talking about. The only dog I have in this fight is my checkbook, and I'm trying to keep Big Business in Texas from buying more votes that will yank more out of my bank account.
I have just one question for you. You state, "if we were still a regulated market, our costs would be higher than the market rates being offered today". We know that prior to deregulation the rates in both Texas and Louisiana were a little over 7 cents per kwh.
We now pay 26% more than they do in Louisiana. Louisiana is still regulated, so why isn't their rate "higher than the market rates being offered today"?
Just wait until the natural gas prices go back up again. We will be paying 15 cents while the surrounding states are paying less than 10 cents. This the result of our marginal fuel equation...which is totally absurd...that our PUC allowed the industry to lock in on.
I have to catch a plane this evening, but I will keep this up as long as you want to. I want to expose every little talking point piece that you guys spit out for what it is .... B.S.
revolver1973
eyeswideopen,
Have a safe flight! Best of luck to you in your efforts to reign in the influence of big business on the way the market is operated in Texas. I certainly agree that this is an important issue that requires diligent citizens. But you must understand the facts. All businesses are not evil. And everyone involved in the energy business is not a wolf hunting down innocent bunnies.
St. Clair Newbern IV
President
Live Energy Inc
http://www.liveenergy.com
JohnJohnson
Revolver, what we have before deregulation was not a "government monopoly". TXU was a viable, public company until they went off chasing rabbits in Austrailia and got burned on their investments there. They had always been allowed a more than decent profit margin, and they were able to recoup all their costs and more. They weren't satisfied.
We once had "our" Public Utility Commission watching out for greed and corruption. Even though they did not do a very good job, it was a better set up than we have now.
eyeswideopen
I know that you deal with commercial entities, and probably do a very good job saving your customers money during fluctuations in the electricity market. They shouldn't need you.
There are no Live Energy, Inc's in Louisiana. Just telling it like it is.
scott
Revolver--There is a difference between being a commercial user of energy and a residential user. The commercial user is in a freer more competitive market. But for the residential user we are sitting ducks.
The same analogy applies in Banking. We call banking "commercial" but this is confusing. The average banking customer needs to be protected, whereas a savvy business and bank should be allowed more leeway.
If you don't understand this, you don't understand utilities/monopolies or the like. Furthermore, you missed the Gas manipulation thanks to Amaranth Partners who jacked up our electricity rates.
Please note that prior to "dereg" we had among the lowest elec. rates. Today we are among the top, even though Natural Gas is at historic lows. Further, consider that we must have the most lax pollution laws.
Large institutional users should be allowed more flexibility but for the average consumer, who is still in a monopoly, they need to be protected. Consider, the electric company's didn't open generation nor distribution to be deregulated, only the most expensive and least profitable aspect of their business customer relations.
By the way, wind power works less than 10% of the time--read Robert Bryce. Wind power requires superfluous power supply to sit ready to accommodate the fluctuation of the wind. Only gas powerplants can be switched on and off with short notice--no wonder T Boone is all behind windmills, it sells his gas.
JMalina
Competition in Texas has created economic and environmental benefits for consumers, The COMPETE Coalition applauds the Tribune for correctly identifying so many of Texas’ electric market successes.
COMPETE closely follows electricity developments across the country and agrees that Texas is without question one of competition’s biggest success stories and its’ consumers enjoy a robust choice of alternative power suppliers.
Texas policymakers have built a strong electricity system which has enabled Texans to enjoy the benefits of market forces. For more information, visit www.competecoalition.com.
eyeswideopen
JMalina.....just admit it....you are a parasite. The organization is set up and funded by people making money in deregulated electricity markets. You bark however your trainer prompts you to. I wonder if someone is paying USToday to disagree with you. There are many others, you know. Independent thinking individuals and entities that aren't prostituting themselves. Read for yourself what USA Today had to say:
http://www.usatoday.com/money/industries/energy/2007-04-21-electricity_N.htm
Your job and the Complete Coalition, and Revolver1973's Live Energy, Inc. were formed as a result of electricity deregulation. You have made money from it . You would be hard pressed to find a Complete Coalition or Live Energy, Inc. in Louisiana.
Let's see..... we Texans have people like you and St. Claire Neubern IV living off of us, and Louisiana has 26% cheaper electricity. Who do you think is getting the best deal?
Trey05
My wife and I prefer to sign up for a year contract during the winter. Rates are usually lower at this time and you can lock the lower rate in until the same time the next year. We have been using Ambit Energy for the past 3+ years and are very satisfied. We sign up for the 100% green plan which only uses electricity produced from wind power. http://www.onlineambitenergy.com