Energy Deregulation Update

NewPower, the erstwhile Enron subsidiary, is pulling out of the Texas market, sending 80,000 customers back to Reliant and TXU while making some people ask if this whole deregulation thing is going to work.

Pending regulator approval, Dallas-based TXU Energy will gain NewPower's 34,000 electricity customers in the Houston area, and Houston-based Reliant will get 45,000 NewPower customers in the Dallas market.

Also, although they will be paying less than local customers who pay the "price to beat" rates of incumbent provider Reliant, many former NewPower customers in Houston will be paying more as customers of TXU.

NewPower has been the most aggressive among competing electricity retailers in the state -- the leader among providers that had convinced customers to switch over from their incumbent provider.

"I think it's going to shake some confidence in the system," said Reggie James, director of the southwest region of Consumers Union in Austin.

When deregulation was first proposed, James said, "there was all this hype about how everyone would save all this money."

The reality, James said, has been numerous billing problems and "now we see the biggest marketer going down the tubes."

The powers that be, of course, disagree, saying that the market is just fine, thanks.

Rep. Steven Wolens, D-Dallas, who co-chairs the legislative committee which has oversight over electricity deregulation, issued a statement affirming the overall strength of the market.

Wolens noted that Texas customers are continuing to pay less than they did under last year's regulated electric rates.

That's in part because the state's new laws on deregulation mandated a significant decrease in the base rates offered by the incumbent providers.

That last sentence has me scratching my head. I admit, I haven't followed the dereg story here very closely. I'm a risk-averse late-adopter. My plan remains to wait and see how much the market shakes out before I look around for another provider. (Actually, I just want to avoid the hassles of making a switch and the worry that my power will get cut off because some phone drone misspelled my name or some such.) But what's up with a deregulation law that mandates a "significant decrease in the base rates offered by the incumbent providers"? Isn't that, like, a regulation of the market? Couldn't we have just mandated the decrease and left things as they were? What am I missing?

There are still a bunch of providers in the market (nine in the Houston area, according to the article), so it's not like we're on the verge of being in an unregulated duopoly. I do have to wonder if anyone's thought of the possible consequences if this market, like so many others in America, goes through a wave of consolidation and buyouts. What happens if some day there are only two or three players? What happens if a part of the state winds up with only one choice?

Posted by Charles Kuffner on June 11, 2002 to The great state of Texas