Industrial customers generally have fared better under the Texas electric deregulation law than have residential customers.
Residential consumers buying electricity from competitive power providers in Texas historically have paid more than those buying power from providers exempt from competition. The Texas Coalition for Affordable Power has documented this historic price disparity over the years and our latest Snapshot Report on Electricity Prices found a small gap remained in 2017.
We posted that Snapshot Report in May. You can read it here.
In July, we went back through the underlying data, but instead with a focus on commercial customers. This month we examine how large industrial customers have fared.
The chart shown here illustrates average industrial prices for electricity from 2002 through 2017, and includes data points for areas inside deregulated Texas, in areas of Texas outside deregulation and average industrial electric prices nationwide.
The data show that both deregulated and non-deregulated industrial rates rose to levels above the national average beginning in 2003 and remained above that benchmark for several years. However, deregulated industrial rates increased at a greater pace than non-deregulated industrial rates during this period, and this led to the emergence of a sizable price gap between industrial rates in deregulated and non-deregulated areas.
This gap hit its peak in the 2007 and 2008. In 2007, Texas industrial customers in deregulated areas paid, on average, 28.2 percent more than those outside deregulation. In 2008, Texas industrial customers in deregulated areas paid, on average, 23.9 percent more than those outside deregulation.
But the trend lines began shifting the following year. Rates in both deregulated and non-deregulated areas fell sharply. By 2010, industrial rates in deregulated areas of Texas dropped below industrial rates nationwide. By 2014, industrial rates in deregulated areas of Texas dropped below the corresponding non-deregulated rates inside the state.
Under the state’s retail electric deregulation law, consumers living in about 85 percent of Texas have a choice of electric providers. Consumers in the remaining 15 percent of Texas do not have similar options, and instead must purchase electricity from a single deregulation-exempt provider in their area.
This bifurcated system — with some Texans receiving service in deregulated areas, and others receiving service in areas exempt from deregulation — provides a unique opportunity to compare prices. TCAP conducts this analysis each year and posts its findings on its website.
The analysis begins in 2002 because that was the first year for retail electric competition in Texas. It ends in 2017 because that is the last year for which data currently exists to conduct this bench-marking analysis. During that year, deregulated industrial rates in Texas were 7.8 percent lower than corresponding Texas rates outside deregulation.
We retrieved data for this analysis and for the earlier May Snapshot Report from the United States Energy Information Administration. For more information on how we use that data and to review the earlier report, go to the TCAP website here.
Is a policy analyst for TCAP, a coalition of cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.