October 07, 2007
How about that utility dereg?

So what do we know about utilities deregulation in Texas? Well, first and foremost, it hasn't delivered on its biggest promise:

"Competition in the electric industry will benefit Texans by reducing monthly rates and offering consumers more choices about the power they use," then-Gov.
George W. Bush said at the time.

Then-state Sen. David Sibley, who was a key author of the bill, put the promise more bluntly:

''If all consumers don't benefit from this, we will have wasted our time and failed our constituency," he said.

Eight years later, many consumers are calling deregulation just that -- a failed waste of time.

From 2000 to June of this year, the average electric rate in Texas rose 56 percent, more than in all but three states, according to the most recent nationwide federal government figures.

"It's like there's a penalty for being a Texan when it comes to your light bill," said Mike Coleman, a Cypress homeowner who also is responsible for the electric bills at an industrial equipment supplier with offices in four states.


[T]he very structure of Texas' deregulated market exposes customers to the full impact of rising natural gas prices more than in other states, or even in parts of Texas still served by regulated electric companies, municipally owned utilities or electric cooperatives.

The 25 percent of Texans living in those regulated markets generally pay less than rates available in markets that have been opened to competition.

Houston residential consumers use an average of 1,130 kilowatt hours a month. Bills for that much power would range from $125.43 to $163.85 based on rates available in Houston at the end of September for a one-year, fixed-rate plan. The average rate available in Houston would produce a monthly bill of $142.95.

The same amount of electricity would cost $97.41 in San Antonio and $105.32 in Austin, both served by municipally owned utilities.

Deregulation supporters say its success should not be judged just on price, and point to the variety of electricity service options available to customers. But they have been slow to take advantage of the choices.

That sound you hear is goalposts being dragged down the field. Who cares about more choices if none of them get you a better deal than what you had before? And even if sufficiently savvy shopping around can get you a discount, was it really good policy if most people can't or won't take advantage of it?

What we do have is some darned fine rationalizations:

Regardless of the wholesale market structure, however, it's unlikely electric prices would have climbed as they have under deregulation had gas prices remained stable.

If gas stayed below $4 per million BTUs, as it had for most of the 1990s when deregulation was being planned, state politicians' projections of lower electric bills might have been met.

"If we still had $3 gas, they'd be building a statue of me somewhere down there in Houston," says Sibley.

But gas prices climbed into the $6 and $8 range beginning in 2003, and spiked to $15.37 in late 2005 when hurricanes Katrina and Rita cut off much of the production in the Gulf of Mexico.

And if wishes were ponies, yadda yadda yadda. Because everybody knows that commodity prices never fluctuate.

Mark Jacobs, CEO of Reliant Energy, predicts that rates in other states will catch up with Texas.

"Those other markets are still on an uphill climb and haven't passed on all the increases in gas prices we saw from Katrina and Rita," Jacobs said.

And when rates do catch up in other states, customers there will still be better off than we are because they'll have spent less in the interim. But hey, at least we'll have had more choices.

Posted by Charles Kuffner on October 07, 2007 to The great state of Texas

I just moved from South Bend, IN to San Antonio (thank God) and my electric bill is unbelievably different. I never, ever, for any reason, paid more than $50/month for the Arctic January/February in SB. My typical monthly electric bill was around $30. But for some reason, in San Antonio, despite being a city-owned utility, the bill is almost double the SB rate. I'm not saying the Midwest is better - its not. Indiana blows. But seriously. This is Texas. We should be the leaders in cheap, efficient energy. Our legislators are aware of options that would make utilties cheaper (even if those options aren't more efficient). Still...uh...as Kinky would say...why the hell not?

Texas is badass, but damn, we can be dumbass, too.

Posted by: patknapp on October 8, 2007 4:28 AM

Does anyone have a list of the Democrats who voted for the disaster of deregulation?

Posted by: Baby Snooks on October 8, 2007 9:33 AM

Ridiculous rhetoric. What does more 'options' even mean? Electricity is either on or off, we don't need options.

Posted by: kh on October 8, 2007 11:26 AM