Texas Electric Bills was $ 28 billion higher under deregulation

Unregulated residential consumers in Texas have paid $ 28 billion more for their power since 2004 than they would at the rates charged by customers of the state’s traditional utilities, according to the Journal’s analysis of data from the federal administration for energy information.

The crisis last week was driven by power producers. Now that the power has been largely restored, attention has been drawn to retail electrical businesses, some of which hit consumers with steep bills. During the crisis, power prices rose for several days to a market price of $ 9,000 per megawatt-hour, a feature of the state’s system designed to encourage power plants to produce more juice. Some consumers who have opted for power plans with exchange rates from retail businesses are seeing the big bills.

None of this was supposed to happen under deregulation. Supporters of competition in the electricity supply industry have promised that it will lower prices for consumers who can buy the best deals, just as for mobile phone services. Supporters of deregulation said the system would be an improvement in the monopolistic utility industry, which has little incentive to innovate and provide better customer service.

“If all consumers did not benefit from this, we would have wasted our time and let our constituency down,” then-Senator David Sibley, a key author of the bill to deregulate the market, said when the link for was first introduced. 1999. “Competition in the electrical industry will benefit Texans by lowering monthly rates,” the then government said. George W. Bush said later that year.

The EIA data shows how much electricity each utility industry or retail supplier sold to residents in a given year and how many customers paid for it. The Journal calculated separate annual rates for utilities and retailers by adding up and dividing all the revenue each type of supplier receives by the kilowatt-hour of electricity it sold.

From 2004 to 2019, the annual tariff for electricity from Texas ‘traditional utilities was on average 8% lower than the nationwide average tariff, while retail suppliers’ tariffs were on average 13% higher than the nationwide tariff, according to the Journal’s analysis.

The Texas Coalition for Affordable Power, a group that buys electricity for local governments, makes similar findings in a study of state power markets and concludes that high prices across the country are “relative to the national average.” to the deregulated sector of Texas. ”

In other countries that allow retail competition for electricity, customers have the option to get their power from a regulated electricity company. The critique says the absence of an established utility industry in parts of Texas that enables retail competition makes it difficult for consumers to know if they are paying too much for power.

The pressure to deregulate the electricity supply market in Texas and elsewhere in the US began in the 1990s amid similar efforts in airlines, natural gas and telephone services. The leader was Enron, the Houston energy company and proponent of free markets that went bankrupt in 2001 amid revelations of widespread fraud.

The generators rewarded the laissez-faire market design that businesses that could sell electricity cheaply and still recover their capital costs. But it has given little incentive for companies to spend cash on infrastructure that could protect power plants during sporadic severe cold.

Catherine Webking, chief adviser to the Texas Energy Association for Marketers, an industry group for retailers, said retail providers give customers access to more choices than many standard applications, such as renewable energy products. Customers also usually have the option to change their mind, she said. If customers “are not the best thing for them, they can find another supplier,” she said.

On the retail side, dozens of competitors emerged after deregulation. But recently, competition in Texas has waned amid a wave or merger in the industry.

Texas is home to the two largest rural retail energy suppliers, Vistra Corp.

VST 1.43%

and NRG Energy Inc.

NRG 3.74%

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

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

Vistra’s largest retailer in Texas, TXU Energy, and NRG said their customers will not be hit by rising prices because their electricity plans are not related to short-term price weaknesses in the wholesale market.

Tim Morstad, co-state director of AARP Texas and a critic of retail energy suppliers, said he expects many retail customers to see an increase in their rates in the near future as the companies charge high power rates during the winter explosion. The most vulnerable, according to him, are customers of retail energy suppliers who have signed up for exchange rate plans that rise and fall every month amid fluctuations in market rates.

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

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

The Texas Public Utility Commission said it has “strongly encouraged retail electricity suppliers to delay billing for residential and small commercial customers.”

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