Fruit Salad Approach BlogSome industry groups have taken the fruit salad approach in an attempt to mask the poor performance of the state”s deregulated electricity market. That is, first these groups will compare apples to oranges by reviewing average rates on the one hand to lowest-cost offers on the other. Then they cherry-pick misleading and often flatly incorrect data to make their point.

To be clear, residential electricity rates consistently were below the national average for years before the deregulation law, and have remained consistently ABOVE the national average after restructuring. As you can see from the chart above, this trend has not changed.

Industry-sponsored studies typically will compare recent prices under deregulation to prices during 2001 — that is, the last year before deregulation took effect in Texas. They argue that such a comparison supports their contention that residential rates have not increased under the Texas deregulation law relative to rates in the rest of the nation.

Unmentioned in these industry “studies” is the fact that rates in 2001 were then spiking above typical levels and that this spike itself was a function of deregulation. That is, it was in that year that the Texas Public Utility Commission allowed utilities to assess various charges on ratepayers as a sort of down payment on later collections anticipated from the restructuring law. The 2001 rates were inflated because of deregulation.

A quick check at the United States Energy Information Administration website shows that Texas residential consumers continue paying above the national average. For instance, in October of 2009 (which is the last month for which the federal government has relevant data),the average residential rate nationwide was 11.76 cents per kw/h. Meanwhile the rate in Texas during that same month was 12.26 cents — or about 4 percent higher. By comparison, Texas rates were nearly 7.5 percent LOWER than the national average in 1999, which was the year that lawmakers adopted the deregulation law.

Moreover, the most current US EIA data shows that Texas residential rates are more than 18 percent higher than those in neighboring Oklahoma and a whopping 50 percent higher than those in Louisiana. Both states use a similar fuel mix to power their generators, but never deregulated their markets.

TCAP believes in market reforms that enhance competition while improving customer protections. Texans can and should pay less for electricity. But the first step is to acknowledge that we can do better.

— R.A. Dyer

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