Texas electricity bills were $ 28 billion higher with deregulation

These deregulated Texas residential consumers have paid $ 28 billion more for their energy since 2004 than they would pay with the tariffs charged to consumers from traditional state utilities, according to the analysis of the Federal Energy Information Administration’s Data Journal.

Last week’s crisis was driven by energy producers. Now that power has been largely restored, attention has turned to retail electricity companies, some of which are hitting consumers with high bills. Energy prices reached the market price ceiling of $ 9,000 a megawatt / hour for several days during the crisis, a feature of the state system designed to encourage mills to supply more juice. Some consumers who have chosen variable rate energy plans from retail energy companies are seeing high bills.

None of this should happen under deregulation. Proponents of competition in the electricity supply sector have promised that this would lower prices for consumers who can look for the best deals, just as they do with cell phone service. The system would be an improvement over monopoly dealerships, which have little incentive to innovate and provide better services to customers, advocates for deregulation.

“If all consumers do not benefit from this, we will have wasted our time and fail with our constituency,” said then state senator David Sibley, one of the main authors of the bill to deregulate the market, when the change was first revealed time in 1999. “Competition in the electrical industry will benefit Texans by lowering monthly fees,” then Gov. George W. Bush said later that year.

The EIA data shows how much electricity each dealership or retail provider sold to residents in a given year and how much customers paid for it. The Journal calculated statewide separate annual fees for utilities and retailers, adding up all the revenues that each type of provider received and dividing them by the kilowatt-hours of electricity it sold.

From 2004 to 2019, the annual electricity rate of traditional Texas utilities was 8% lower, on average, than the national average rate, while retail supplier rates were on average 13% higher than the national rate, from according to the Journal’s analysis.

The Texas Coalition for Affordable Power, a group that buys electricity for use by the local government, produced similar results in a study of the state’s energy markets and concluded that high state prices relative to the national average “should be attributed to the unregulated sector of the Texas. “

In other states that allow competition in retail electricity, customers have the option of obtaining their energy from a regulated utility. The absence of a utility in parts of Texas that allows retail competition makes it difficult for consumers to know whether they are paying too much for energy, critics say.

The pressure to deregulate the electricity supply market in Texas and elsewhere in the United States began in the 1990s, amid similar efforts in airlines, natural gas and telephone services. Leading the attack was Enron, the Houston energy company and free market champion that went bankrupt in 2001 amid widespread fraud disclosures.

For power generators, the laissez-faire market project rewarded companies that could sell electricity cheaply and still recover their capital costs. But it provided little incentive for companies to spend money on infrastructure that could protect plants during sporadic waves of severe cold.

Catherine Webking, general counsel for the Texas Energy Association for Marketers, an industry trade group, said that retail suppliers offer customers access to more options than many standard utilities, such as renewable energy products. Customers also often have the option to change plans, she said. If customers “don’t think it’s the best thing for them, they can find a different supplier,” she said.

On the retail power side, dozens of competitors emerged after deregulation. But recently, competition in Texas is easing amid a wave or mergers in the industry.

Texas is home to two of the country’s largest retail energy suppliers, Vistra Corp.

VST 1.43%

and NRG Energy Inc.

NRG 3.74%

Merchants now owned by the two companies accounted for three-quarters of the retail electricity sold in Texas in 2019.

In January, NRG completed its $ 3.6 billion purchase from retail energy provider Direct Energy, which doubled NRG’s retail customers to six million and increased its workforce from 4,500 to 7,500. About half of its retail customers are in Texas.

Vistra’s largest retail subsidiary in Texas, TXU Energy and NRG, said their customers would not be hit by price increases due to blackouts because their electricity plans are not linked to short-term price swings in the electricity market Wholesale.

Tim Morstad, associate director of state at AARP Texas and a critic of retail energy suppliers, said he expects many retail customers to experience increased tariffs in the near future, as companies charge sky-high energy rates seen during the winter explosion. The most vulnerable, he said, would be customers of retail energy suppliers who signed up for variable rate plans that increase and decrease each month amid fluctuations in market rates.

“Prices are definitely going to go up,” he said. “For those with variable contracts, they will feel the squeeze earlier.”

Some retail energy suppliers enter into long-term contracts for the electricity they sell to consumers, potentially protecting them from the dramatic increase in the wholesale market seen last week, said Kenneth Rose, an independent consultant at Michigan State University who studied retail. energy industry.

The Texas Public Utility Commission said it “strongly urged” retail electricity providers to delay billing for residential and small business customers.

Write to Tom McGinty at [email protected] and Scott Patterson at [email protected]