Texas Electric Bills were $ 28 billion higher under deregulation

Those deregulated Texas residential consumers were paying $ 28 billion more for their power since 2004 than they would have paid at the rates charged to the customers of the state’s traditional utilities, according to the Journal’s analysis of the data. federal Energy Information Administration.

Last week’s crisis was driven by energy producers. With power largely restored, attention has turned to retail electrical companies, a few of which plague consumers with high bills. Power prices have risen over several days during the crisis to the market price of $ 9,000 per megawatt hour, a hallmark of the state system designed to incentivize power plants to provide more juice. Some consumers who have opted for variable rate power management companies see the high bills.

This should not have happened under deregulation. Proponents of competition in electricity supply promised it would lower prices for consumers who could shop around for the best deals, as well as for cell phone services. The system would be an improvement over monopolistic utilities, which have little incentive to innovate and provide better service to customers, advocates of deregulation say.

“If not all consumers take advantage of this, we will have wasted our time and our constituency failed,” said then-Senator David Sibley, a key author of the bill to deregulate the market, when the switch was first revealed in 1999. “Competition in the electrical industry will benefit Texans by cutting monthly rates,” Dan-Gov. George W. Bush said later that year.

The EIA data shows how much electricity each utility or retailer sold to residents in a given year and how much customers paid for it. The Journal calculated separate annual statewide rates for utilities and retailers by adding up all the revenues from each type of provider and dividing by the number of kilowatt-hours of electricity it sold.

From 2004 through 2019, the annual electricity tariff of Texas traditional utilities was, on average, 8% lower than the national average, while retail provider tariffs were on average 13% higher than the national rate, according to the Journal’s analysis.

The Texas Coalition for Affordable Power, a group that buys electricity for use by the local government, came to similar findings in a survey of the state’s energy markets and concluded that high statewide prices relative to the national average “should be” attributed to Texas deregulated sector. “

In other states where retail competition for electricity is allowed, customers have the option to get their power from a regulated utility company. The absence of an established utility company in parts of Texas that allows retail competition makes it difficult for consumers to know if they are overpaying for power, critics say.

The push to deregulate the electricity supply market in Texas and elsewhere in the US began in the 1990s amid similar efforts from airlines, natural gas, and telephone services. Leading the charge was Enron, the Houston energy company and free-market champion that went bankrupt in 2001 amid revelations of widespread fraud.

For power generators, the laissez-faire market design rewarded companies who could sell electricity cheaply and still get their capital costs back. But it gave companies little incentive to spend on infrastructure that could protect power plants during sporadic severe cold snapshots.

Catherine Webking, general counsel for the Texas Energy Association for Marketers, an industry group, said retailers give customers access to more choices than many standard amenities, such as renewable energy products. Customers also typically have the option to switch plans, she said. If customers “don’t think this is the best for them, they can look for another provider,” she said.

On the power side of the retail trade, dozens of competitors emerged after deregulation. But recently, competition in Texas has been on the wane amid a wave of industry mergers.

Texas is home to the two largest retail energy suppliers, Vistra Corp.

VST 1.43%

and NRG Energy Inc.

NRG 3.74%

Marketers now owned by the two companies accounted for three-quarters of the electricity retail sales sold in Texas in 2019.

In January, NRG completed the purchase of $ 3.6 billion from retail energy supplier Direct Energy, doubling NRG’s retail customers to six million and increasing its workforce from approximately 4,500 to 7,500. About half of its retail customers are in Texas.

Vistra’s largest Texas subsidiary, TXU Energy, and NRG have said their customers would not be affected by high prices due to the power outage, as their electricity plans are not tied to short-term price fluctuations in the electricity wholesale market.

Tim Morstad, associate state director of AARP Texas and a critic of retail energy providers, said he expects many retail customers to face increases in their tariffs in the near future as the companies price sky-high energy rates during the winter explosion. Most vulnerable, he said, are customers of private energy providers who have signed up for variable-rate plans that rise and fall each month amid swings in market rates.

“Prices will certainly go up,” he said. “For those on variable contracts, they are more likely to feel the pinch.”

Some retail energy providers are entering into long-term contracts for the electricity they sell to consumers, potentially shielding them from last week’s dramatic surge in the wholesale market, said Kenneth Rose, an independent consultant at Michigan State University who has studied retail. energy industry.

The Texas Public Utility Commission said it has “strongly encouraged” retail electrical suppliers to delay billing for retail and small commercial customers.

Write to Tom McGinty at [email protected] and Scott Patterson at [email protected]