Texas electricity bills topped $ 28 billion under deregulation

These deregulated Texas residential consumers paid $ 28 billion more for their energy since 2004 than they would have paid at the rates charged to customers of traditional state utility companies, according to data analysis released by the journal of the Federal Energy Information Administration.

Last week’s crisis was driven by energy producers. Now that energy has been restored, attention has focused on retail electricity companies, some of which affect consumers with high bills. Energy prices rose to the market price limit of $ 9,000 per megawatt hour for several days during the crisis, a feature of the state system designed to encourage power plants to supply more juice. Some consumers who chose variable energy plans from retail power companies see the big bills.

None of this was supposed to happen under deregulation. Competitive sponsors in the electricity supply business promised to reduce prices for consumers who could look for the best deals, just as they do for mobile phone service. The system would be an improvement over public monopoly services, which have few incentives to innovate and provide better service to customers, according to supporters of deregulation.

“If all consumers don’t benefit from this, we will have wasted our time and failed our constituency,” said state Sen. David Sibley, a key author of the bill to deregulate the market, when it was introduced. the change to 1999. “Competition in the power industry will benefit jeans by reducing monthly tariffs,” then Gov. George W. Bush said later that year.

EIA data shows the amount of electricity that each utility or retail provider sold to residents in a given year and the amount of customers who paid for it. The Journal calculated the separate annual statewide rates for utilities and retailers by summing up all the revenue each type of supplier received and dividing it by the kilowatt-hours of electricity it sold.

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

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

In other states that allow electricity retail competition, customers have the option to obtain energy from a regulated company. The absence of a titular utility in some parts of Texas that allows for retail competition makes it difficult for consumers to know if they pay too much for energy, critics say.

The push to deregulate the electricity supply market in Texas and elsewhere in the United States began in the 1990s amid similar efforts by airlines, natural gas and telephone services. At the helm of the indictment was Enron, the Houston energy company and free market advocate that went bankrupt in 2001 amid revelations of widespread fraud.

For power generators, the design of the laissez-faire market rewarded companies that could sell electricity economically and still recoup their capital costs. But it provided few incentives for companies to spend money on infrastructure that could protect power plants during sporadic intense cold spells.

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

As for retail power, dozens of competitors emerged after deregulation. But recently, competition in Texas has been waning amid a wave or mergers in the industry.

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

VST 1.43%

and NRG Energy Inc.

NRG 3.74%

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

In January, NRG completed the $ 3.6 billion purchase from retail energy supplier Direct Energy, which doubled NRG’s retail customer base 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 Texas retail subsidiary, TXU Energy, and NRG have said their customers would not be affected by a price increase due to shutdowns because their electricity plans are not tied to short-term price changes in the wholesale electricity market.

Tim Morstad, associate state director of AARP Texas and a critic of retail energy suppliers, said he expects many retail customers to experience rate increases in the near future as companies value high energy rates which were seen during the winter explosion. He said the most vulnerable would be customers of retail energy suppliers who have subscribed to floating rate plans that rise and fall each month amid fluctuations in market rates.

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

Some retailers hire long-term contracts for the electricity they sell to consumers, which may protect them from the dramatic rise in the wholesale market seen last week, said Kenneth Rose, an independent consultant at Michigan State University that has studied retail. energy industry.

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

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