News reports don't tell the whole Texas deregulated electricity story

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By Arthur Murray May 23rd, 2018
For business

Two recent newspaper reports in Dallas and Houston give an incomplete view of the ongoing argument of whether deregulation is good or bad for Texas consumers. Both articles are based on a report issued by the Texas Coalition for Affordable Power, Electricity Prices in Texas.

The Dallas report is closer to the truth. It notes that customers in deregulated areas – as of the most recent numbers available – paid more than their counterparts in the still regulated parts of the Lone Star State. And that the “most recent numbers available” end in 2016. And that the gap has been closing – the difference is now 8.8 percent – the smallest margin since the study started.

But here’s where things get confusing, to quote the article: “(T)he study found that Texas electricity prices were the third lowest among the 15 states with deregulated markets, ahead of only New York and Maine.”

What does that even mean?

Deregulated electricity in Houston

Deregulated electricity in Houston

There’s less garble in the Houston piece, but there still are problems.

Start with the headline: “Want cheap electricity? Move to San Antonio or Austin” with a subhead that adds the line “Houston consumers pay more for electricity, thanks to deregulation.” Customers in Houston were paying 9.7 cents per kilowatt hour (kWh) in 2002, when deregulation began. As of May 22, Houston customers could pick from three plans offering lower rates than that. In other words, some prices have fallen over the 16 years since deregulation began.

Is it true that prices in deregulated areas are higher than those in regulated areas, as the Electricity Prices in Texas study says? Yes, that’s true. Is it true that customers sometimes chose plans with prices that were higher than other options that were available? Yes – the study is clear about that. Is it possible that deregulation likely is suppressing prices even in regulated parts of the state? Yes. Is that discussed in the Houston article? No.

To be fair, the article on the Houston market does make some points on behalf of deregulation – in its final two paragraphs.

“(T)here are deals in the unregulated markets if customers take the time and effort to look,” it says. “The study cited a Public Utilities Commission survey of competitive deals in Houston that showed nine offers in March that were lower than the regulated price of electricity in San Antonio” – one of the cities where the headline urges people to move for cheap electricity.

The last paragraph mentions the narrowing of the gap between prices, but closes by pointing out the gap was nearly 47 percent in 2006. Relevant much?

Dallas and the more complete picture

Now back to Dallas for a moment. This piece, aside from the incomprehensible sentence reproduced above, does acknowledge the following from the study:

Customers in deregulated areas don’t always pick the lowest prices available, for reasons that can include a desire to opt for renewable energy, longer plan terms and brand recognition and trust.

Prices increased in regulated areas by 6.1 percent during the study period. They fell in deregulated areas by 19.6 percent over that same time. Since deregulation was instituted in 2002, average Texas residential prices increased in both markets, with the smaller increase in deregulated markets.

Again, before deregulation, electricity customers in Dallas paid 9.7 cents/kWh, according to a analysis of how deregulation has worked in Texas. As of May 22, plans were available for 8.2 cents/kWh.

The bottom line is that price alone isn’t necessarily the best way to judge the success of deregulation. It takes a while for any market to mature. The Texas deregulated market continues to mature, and the city of Lubbock recently asked to join it.

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