Texas Deregulation Has Lowered Consumer Prices Despite What Opposing Voices Say

electricitmarketsI have read many articles over the last few years of how electricity deregulation in Texas is not working. I hate to jump on conspiracy theory band wagons but the news media always seems to point out that electricity deregulation hasn’t worked and give biased stats to direct the reader to the same conclusion.

When you look at the whole picture the numbers show a different conclusion than what is touted in the news. Electricity deregulation in Texas actually has reduced electricity prices for consumers in Texas.

In reality Texas consumers enjoy shopping for a cheap electric company in Texas and routinely do so and are benefited by lower prices.

If you are an electric service consumer in a deregulated area of Texas and are willing to shop for the best price you will pay far below the regulated prices you saw a decade ago under regulation by the state.

When you add in inflation to the price of electricity it comes out even better for the consumer.

Let’s consider the most competitive city in Texas for retail electricity, Houston. The Centerpoint Energy utility area covers the city of Houston and surrounding cities.

A year ago a 1 year fixed rate could be had for about 9 cents per kilowatt-hour. The variable prices you could find went for around 5.2 cents per kilowatt-hour for the first month.

Compare these rates from last year with 2001 prices when Texas was still under complete electricity price regulation by the state.

In 2001 the regulated price for electricity was 10.4 cents per kilowatt-hour in the city of Houston and cities surrounding Houston. When you factor in inflation the comparable rate as of today would be 13.6 cents per kilowatt-hour.

As of today a consumer can shop around and save about 45 % less than what you could get in the not so competitive electricity market of 2001.

Think about this for a moment, have you seen a reduction in your cable television bill, phone, groceries, taxes since 2001? In comparison electricity has been declining in price in Texas over the last few years but many other essential services have been going up.

Lower natural gas prices definitely help keep your electricity price cheap but as of right now the Henry Hub spot price for natural gas is actually 40 % higher than it was in December of 2001.

Considering Texas generates much of its electricity using natural gas this should surprise you that in a competitive market we have lower prices even with a disadvantage in the price of the raw resource we use to generate electricity.

You will find some municipalities and Co-ops in the state that charge their customers less for electricity than in retail areas but this is not true in all municipalities and co-ops and often changes. In fact right now many municipalities and co-ops are undergoing rate changes.

I have seen Co-ops and municipalities that have prices below some retail providers as of today that at one time were charging 2 cents per kilowatt-hour higher than everyone else.

I bring up the example of the municipality and Co-op to simply explain that you can’t point to the municipality that happens to be lower in price for a few months as to proof deregulating an electricity market doesn’t work.

Even with a cheaper price coming from a municipality you will still find areas of the state that are deregulated with even cheaper prices than the municipality. The problematic price difference next door such as Tyler Texas’ prices and Longview’s prices don’t give you an accurate picture.

A municipality escapes several expenses a retail electric provider has simply by being a municipality with access to public funds but even still some retail providers in Texas remain cheaper.

A common argument is also that had the state of Texas kept the electricity markets regulated prices would likely have remained unchanged. This is very unlikely when you take into account that utilities have taken on rate increases to build more power plants, upgrade transmission lines and power poles, and simply to fund operations like health care and pensions for employees.

Even under regulation news organizations would likely still banter about that the regulated electricity market has run a muck each time a price increase happens to cover these utility upgrades.

The California energy market manipulation of 2001 that had Reliant Energy charged and Enron trading managers plead guilt to market manipulation is used to explain that an electricity market should never be deregulated.

In reality California is a benchmark case study in what not to do and has allowed other states to set up a system that prevents such manipulations from ever happening again.

The Texas PUCT, ERCOT, and others police the energy market transactions that happen in Texas and have even been blamed for over policing the system causing inefficiencies in the deregulated market. If anything Texas does too much to police the energy wholesalers that deal in these very large energy block trades.

In summary, it should be obvious when looking at the whole picture that deregulation has had a huge benefit to the electricity service customer by actually lowering prices. If you want to make the competitive markets work in your favor you need to shop for the cheapest provider each time your energy contract is up. I always recommend putting a reminder to go off in your phone a month before your contract ends so you are sure to always have the lowest price a competitive energy market is able to give you.

You can read more about this topic by going to this article

Another Free Market Failure Accusation About Texas Electricity Deregulation

Clean Coal Power Mike Norman with the Fort Worth Star Telegram hits on the topic of if Texas deregulation is really working. I assume he places blame on deregulation as the reason for the Texas power supply failure because the title of his article states, “The Texas free market for electricity just isn’t cutting it“. Maybe he is just meaning that as good as deregulation is it can’t stop the EPA and other non-governmental organizations from halting all oil based energy production thereby raising consumer costs. Deregulation being a failure is a popular argument because any time prices go up or supply capacity is reached we hear about it from the political side that benefits the most from this view.

Is deregulation to blame for every time something bad happens in the deregulated Texas electricity market? No you can’t always blame it on deregulation but it is a piece of the puzzle so yes it is to blame sometimes. The main problem with deregulation isn’t inefficiencies building electric grid infrastructure and power production as this gets approved by the state and then shutdown by the EPA and federal government, not deregulation. Texas has broken up the generation companies and such away to allow new investors to come in and build power facilities but not many have filled this hole left open for increased competition. I think new investors have not come in because you are talking about investing in and building highly federally regulated things like coal, natural gas, and nuclear power facilities.  What new investors want to do what TXU just got shutdown by the EPA for trying to do? I see problems with how some retail providers try and use tricks to market their electric rates but regarding power supply being built out the bottleneck seems to be in government regulation still being in the mix too much.

Even if the market was regulated again under one monopoly per electric utility area you would just as easily be able to blame brownouts and blackouts on the monopoly regulated electric utilities just like deregulation gets blamed for things now. I don’t think Mike is trying to place all the blame on deregulation but he is pointing out that you will see an electric bill increase regardless of the provider you choose because of some recent failures in the Texas deregulated market. You see you very likely will find more non-negotiable ERCOT related fees on your electric bill eventually because of lack of electric supply available to meet demand but who is really to blame for this?

Mike explains that a free market should work in theory because investors are encouraged to place their money where the highest return will be received and in so doing offer just enough electricity to cover the demand as well as spikes in demand. In a perfect system the investor is rewarded a maximum profit for producing just the right amount of power with very little waste left over.

The problem Mike sees with the current deregulated market in Texas is that power plants break down or have to be shutdown to fix or maintain it resulting in loss of supply. If Murphy’s Law is in effect and a power demand spike occurs around the same time as a maintenance shutdown all of a sudden there is not enough power to go around for everyone.

These imperfections are problems that political powers bring up in order to fault the great electricity deregulation experiment of 2002. Will this blame game reverse deregulation in Texas? I really doubt that deregulation can be reversed anytime soon. There is huge public support for energy choice in Texas. Many people can show you on their electric bills how they have saved money because of deregulation simply from using our Electricity Bid website.

Is Deregulation to Blame for Lack of Sufficient Power Supply in Texas?

The problem we are faced with in regards to electric power supply in Texas for 2012 is unreliable power supply due to not enough power plants in operation. Is deregulation responsible for this lack of power?

No! In fact TXU was approved for and planning to build 11 new coal fired power plants that utilized clean burning technology and significantly reduced pollution from these plants compared to the old mothballed coal plants from the past. The prior mayor of Houston and Democratic nominee for governor of Texas, Bill White complained in 2010 that these plants were unnecessary but now they seem all too necessary. ERCOT predicts very tight power supplies this summer and this has politicians frantic but I’m sitting here wondering why we didn’t just get started on those 11 coal plants in 2010?

I think what Pat said has a lot to do with our problems…..Pat Ennis with Priority Power Management said, “”I’m not the smartest guy around, but I’d be willing to bet that… we’re not going to have any coal plants built here in Texas for a long time — between the EPA and the environmentalists, coal is kind of a no-no.”

The state of Texas has been contending with attacks from the Environmental Defense Fun and the EPA in regards to an argument that is mainly about the states CO2 emission levels. Instead of focusing their argument primarily on pollution like mercury levels and other scientifically verifiable pollutants they were able to stop 11 new coal fired power plants from being built by TXU because of a global warming argument.

Many scientists and climate scientists non-affiliated or backed by the United Nations IPCC organization disagree that global warming has a negative environmental impact or that man has anything to do with it. Over the last decade their has been a decline in average global temperatures and so to even argue CO2 levels to prevent Texas from expanding their power capacity only serves to hurt these environmental activists causes.

What Can Texans Do to Increase Power Supply?

Does anyone remember back a few years ago when TXU proposed building multiple state of the art clean burning coal power plants? These power plants would have significantly updated the power infrastructure in Texas but the plan was shutdown because of environmental nut jobs. Even though the power plants would have been state of the art cheap coal power with significant reductions in pollution compared to current coal power plants in operation the plan did not go through. The state of Texas must fight the EPA and federal government politically where it hurts and take back our state and its ability to provide power to our citizens.

Even with an unsatisfactory amount of power generation plants built in Texas we have seen a steady increase in large commercial and industrial facilities building on-site power grid infrastructure that are little mini power generators for their companies. These miniature power generators also known as distributed generation systems account for a large portion of the overall electricity consumption in Texas. During peak demand periods in the day these generators can turn on resulting in no need for the state to start rolling blackouts in residential neighborhoods.

The Texas demand curtailment program has been a huge success. Companies are paid to enroll in a program that they do not even have to participate in when and if they are asked to turn off their power for maybe only 20 – 30 minutes in the span of 1 month. The program is enrolled to it’s limits each time Texas opens it back up. What does this mean? There are likely more than enough large commercial and industrial facilities that would jump at the chance to shutdown production for a short interval in exchange for being paid by the state of Texas to do so. Consider that many large companies like this shutdown once a month anyway to test their back up generators so why not get paid to do this?

Solar generation at this time is not a good option for solving the states problems but has limited uses.  As we have seen, large federally backed companies like Solyndra have not even been able to stay a float because of the expense it costs to produce cheap affordable power using solar. Hey I am a fan of solar but like most people I can’t afford to build a solar off the grid system on my home or business. If I can’t afford the system like most of us why would you think the federal government can? We are at record breaking tax deficits in the beginning stages of an economic collapse and those tax dollars are to be used for things that are considered affordable and have at least a 10 year return on investment. Wind power is a partial option but is only viable to use in combination with natural gas power generation as it can share in the control systems and connections to the grid.

The smart meters, and energy efficiency programs utilities across the state offer continue to assist in teaching home owners how to make their homes more efficient and lower their monthly energy bill. These programs should continue to be encouraged and promoted through local electric utilities that control the power infrastructure.

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