AECT: Small Customers are Losers under Retail Electric Competition

Written on: April 24, 2009

lighbulbIt’s no longer a secret that the Texas electric market has led to skyrocketing electric bills. Texas consumers have gone from paying rates below the national average to prices well above it.

What’s interesting, however, is that this trend appeared to have been accurately predicted by the Association of Electric Companies of Texas, an industry trade group that is now one of the state’s biggest cheerleaders for deregulation.

In a 1996 report that AECT now would probably like to forget, the industry group reported that Texans were then paying rates below the national average rates — a fact that AECT said raised question about the sudden urgency for the market change. AECT noted that “customers in relatively low-cost states, such as Texas, likely would see fewer of the benefits of electric competition than customers in higher cost states.”

“This data suggests that there is no compelling short-term economic development need to attempt to lower electricity prices, because Texas already enjoys a competitive advantage,” the report continues.

In the now hard to find study, AECT noted that small customers and low-income customers would be the hardest hit by the market change.

“There are significant economic costs associated with retail (electric deregulation) in Texas, with clear-cut winners (large customers) and losers (smaller customers) if the provision of electricity service is opened to retail competition,” AECT stated.
“Therefore, retail competition likely will have a more negative impact on poor Texans.”

Speaking about deregulation efforts generally AECT noted that “the benefits of competition (in the form of lower prices) flow first to the largest customers, with smaller customers (or customer classes) seeing either a reduction in service level or an initial rise in price.”

AECT has now flip-flopped on the issue. This, despite years of price increases in Texas that have outstripped increases in most other states — including most other deregulated ones.

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