There’s a lot been made about the relationship between natural gas prices and how much we all pay for electricity. That’s because a large portion of the energy sold in the Lone Star State comes from gas-fired electricity plants. So when the price of natural gas goes down, so too does the price of electricity.
We’ve witnessed that trend over the last couple of years, with the decline of average residential electricity prices from the highs suffered during the 2007 and 2008 time period to more moderate prices now. That average residential electricity prices have come down with declining natural gas costs is good news for consumers.
But that still doesn’t mean the Texas market is working the way it should. Consider this fact: while electricity prices have come down over the short term, they’ve increased alarmingly over the long haul — especially when compared with prices registered elsewhere in the nation. Data collected by the federal government show that the average price of electricity for residential consumers has gone up by a greater percentage in Texas than in most other states. This is a consistent trend we’ve seen since 1999, which is the year Texas adopted its deregulation law.
The fact that Texans have suffered these steeper-than-average increases over the long-term — despite the transition to deregulation and despite the overall lowering of natural gas costs — indicates this market still needs serious work.
The chart just above shows a comparision of price increases among states. You can click on it to see a larger version. The chart, which has data culled from the United States Energy Information Administration, shows that average electricity prices have gone up 37 percent nationwide, but 45 percent in Texas. Earlier we posted an analysis showing that Texas electricity prices do not compare favorably to prices in neighboring states. Here’s the link. We’ve also found that Texans in deregulated areas typically pay more for electricity than Texans outside deregulation. You can check out our report, The Story of ERCOT, to learn more.
Unfortunately, the Texas Legislature this year passed up several opportunities to reform the market. For instance, TCAP’s proposal for standard-offer products would have made it easier for Texans to shop for electricity. That legislation, sponsored by Sen. Wendy Davis and Rep. Sylvester Turner, died under pressure from lobbyists for big electric companies, such as Reliant and TXU Energy. The legislature also failed to adopt a bill to bring more fiscal oversight to ERCOT, which is the organization that oversees the Texas power grid.
However, lawmakers did adopt consumer-friendly legislation by Sen. Burt Solomons that closes a loophole which would have allowed electric companies to profit from violating rules in the wholesale electricity market. You can find a quick summary of consumer energy bills, and their eventual fate during the 82nd Legislative Session, at this link.