Electricity still too expensive under Texas electric deregulation law
That electricity rates have gone down in recent months is great news without a doubt. But that doesn’t mean that flaws in our state’s deregulated system have been corrected.
Consider, for example, what residents in the state’s largest city with deregulation pay for electricity versus what residents in the state’s largest city without deregulation pay. In Houston’s deregulated market, dozens of retail electric providers compete for customers. In San Antonio, a single municipally-owned utility serves everyone.
But according to a recent pricing survey on the Public Utility Commission web site, the cost of 1,000 kw/h of electricity from the very lowest fixed-rate deal available in Houston was $94.20, while the cost for that same amount of power for all customers in San Antonio was $91.67. That means that Houstonians can shop around all they like under electric deregulation, and still end up paying more for fixed-rate electricity than what everyone pays in San Antonio.
Not only that, but electricity sold under the very lowest fixed-rate deal in Houston is still more expensive than electricity sold by every municipally-owned utility surveyed by the PUC, and more expensive than all but one investor-owned utility. This is according to a PUC pricing survey for April, the most recent month available at the agency.
Sources outside the PUC tell a similar story. For instance, Whitefence.com, a commercial website, shows Houston as having the third most expensive electricity among cities it surveyed nationwide for April 2011.
Interesting information. I would like to see the same information over time from 5 years before deregulation to 2 or 3 years after we get through paying the amortized costs of the breakup of the legacy companies. It may be impossible to accout for but there may be some differences between beginning and ending “inventory” of line and pole facilities and generation.
The links to the PUCT website didn’t work for me (maybe because the PUCT just revised their website). A little searching turns up the $91.27 figure at the PUCT site at http://puc.state.tx.us/industry/electric/rates/NCrate/2011/Apr11r.pdf.
The corresponding document for competitive offers, with a $94.24 figure for Amigo, is now at http://puc.state.tx.us/industry/electric/rates/RESbill/bill11/Apr11Bill.pdf.
(I notice the Power to Choose website currently lists a handful of 12 month fixed rate offers in Houston that clock in just under the CPS rate in San Antonio for 1000 kwh.)
Though the cost of living is generally lower in San Antonio than in Houston, so it is not surprising that power is a little cheaper there.
Mike, thanks for writing. As to your point: I agree that it’s not surprising that the cost of electricity is cheaper in San Antonio — but not because the cost of living is cheaper there, but because of inefficiencies in our deregulated system. Why else is electricity also cheaper in Austin, where the standard of living is arguably higher than that in Houston? Why else is electricity also cheaper from every other investor-owned utility and municipal utility surveyed by the PUC, save one? And as other research has shown, Texans in deregulated areas are largely paying more for electricity than these lowest-cost offers cited on the Power to Choose website. Consumers can’t simply switch to the lowest cost providers every month and get these deals because of the hassle of doing so, and because of contract limitations, such as early termination fees.
David, thanks for writing. As for your question regarding electricity prices prior to deregulation, our report, “The Story of ERCOT,” includes much of that data. It’s available for download at rechargetexas.com. You can also check out this earlier blog post: http://rechargetexas.com/electric-deregulation/report-15-5-billion-in-excess-electric-costs-under-texas-electric-deregulation/
Seriously? Your proof is that San Antonio is only $2.53 cheaper a month? To me that proves that deregulation works because prices across the state have dropped consistently over the past 6 to 7 years, and CPS has had to keep pace to avoid the political pressure to deregulate themselves. (Do some background investigation – CPS is looking into this!) And as for the “slight” difference – everything in SA is cheaper than Houston – as is Dallas – As is Waco, as is Tyler – etc. The cost of living is SA is cheaper. Food is cheaper, gas is cheaper. $2.50 a month! I’m sorry, but that is a weak argument that sounds like you spent about 5 minutes on google researching for your blog posting. There is SO much more involved in deregulation! Deregulation really didn’t start producing the promised results until 3 years inro the process! Now it is working. If you want a real story – take a look at how much CPS gives SA in kickbacks to keep from being deregulated.
John,
The fact remains that electricity has been consistently cheaper in San Antonio during the deregulated years than it has been in Houston. Also, the price of electricity has been consistently less in Austin, where the standard of living is arguably higher than it is in Houston. Also, the price of electricity has been consistently less for every other investor-owned utility and municipal utility surveyed by the PUC except for one. It’s good news for consumers that prices are coming down in Houston and other deregulated areas. But a recent report has shown that electric prices have come down more quickly in areas of the state without deregulation. You can find a link to that report here: http://rechargetexas.com/electric-deregulation/report-15-5-billion-in-excess-electric-costs-under-texas-electric-deregulation/
The real question is “What has been the percentage change in rates since deregulation in both markets?” If electricity started out 10% higher in Houston than San Antonio and is now 3% higher then deregulation is working.
Good point Tom. And in fact, we do have data regarding the percentage change in both markets. And here again, the available information shows that our deregulated system needs some work. Average electricity costs in deregulated areas of Texas increased 53.3 percent since the beginning of deregulation. For areas of Texas outside deregulation, the price increase was much less severe — only 30.9 percent. This is based on the most recent relevant data from the United States Energy Information Administration. You can find more information about this topic in a new report on the history of deregulation. Here’s a link to the 2004 section that includes a relevant chart: http://historyofderegulation.tcaptx.com/chapter/year-2004/