Electricity costs here exceed U.S. average
But affordable deals for electricity are starting to increase, official for nonprofit coalition says
The average cost of electricity for Texans in deregulated power markets, including Houston, exceeded the national average for the first time in three years, a new report says.
T he average cost of electricity for Texans in Houston and other parts of the state with deregulated power markets exceeded the national average in 2014 for the first time in three years, according to a report released Wednesday.
The 85 percent of Texans who live in deregulated service areas also paid about 15 percent more than residents in communities with municipal utilities, such as San Antonio and Austin, according to the annual report by the nonprofit Texas Coalition for Affordable Power, which represents more than 165 Texas cities and political subdivisions across the state.
The Texas Legislature deregulated the electricity market for most of the state in 2002 to create competition, provide more choices to consumers, and lower rates. So far, however, deregulation has yet to fulfill all its promises.
Between 2002 and 2014, the most recent year for which data is available, customers in deregulated markets paid $24 billion more — an average of $5,100 per household — than their counterparts in regulated markets served by municipal utilities or power cooperatives, according to the coalition. The cost gap between regulated and deregulated markets has shrunk in recent years, the coalition said, and customers who do the research and legwork can find lower prices in markets with competition.
“Over the long term, it’s simply a fact Texans have paid quite a lot more on average in areas of deregulation,” said Jake Dyer, policy analyst for the coalition. “But there is some evidence the deregulated market is maturing a little bit. It seems clear that the number of affordable deals is increasing.”
Areas served by municipal utilities and
co-ops maintain the model of a regulated utility that both produced power and sold it to customers, who had no other choice.
When the Legislature approved deregulation, it broke up traditional regulated utilities into its component parts: power generation, retail sales, and distribution. Power generation and retail sales became competitive markets, giving customers the power to choose where they bought their electricity.
The power line companies, which transport the power from generator to customer, remain regulated. For example: Houston’s CenterPoint Energy, which distributes electricity to more than 2 million customers in the area regardless of which retailer sells them electricity. Fixed costs
The fixed costs charged by the transmission companies also have risen dramatically in the deregulated markets, the report contended. CenterPoint, for instance, has increased its monthly charges from a monthly average of $24.61 in September 2003 to $42.41 in March 2016. That’s not counting pending rate hike proposals.
Customers have gotten some relief from the falling price of natural gas, which fires many power plants. That decline helped Texas’ deregulated electricity costs sink below the national average for the first time in 2012 and 2013. But the costs rebounded in 2014, rising to 12.59 cents per kilowatt-hour compared to the national average of 12.52 cents, the report said.
Texans in regulated markets paid less than 11 cents per kilowatt-hour. ‘Gotcha’ deals
The report gives several reasons for the divide, including a complicated system with an overwhelming number of choices that make it difficult for customers in competitive markets to find plans that work best for them.
For example, Dyer said, some customers unknowingly sign up for “gotcha” deals that promise low rates, but penalize customers if they don’t use a minimum amount of electricity.
“There are a lot of deals out there with terms and conditions in the fine print that are really confusing to customer,” Dyer said.
Joey England, who recently moved from New Mexico to Houston, said she didn’t realize she’d have to shop for her power, a process she found bewildering.
“I definitely had no idea what to do and who to pick from,” said England, who ultimately picked Direct Energy because a friend who worked there recommended it, and the rates seemed competitive. Natural gas slide
The coalition noted that the continued slide in natural gas prices since 2014 has likely narrowed the gap further between regulated and deregulated markets even more. Austin Energy said Tuesday that its rates are now more expensive than the majority of the state, in part because of its increasing reliance on renewable wind and solar power.
Julia Rathgeber, chief executive of the Association of Electric Companies of Texas, which represents retail electricity companies, said in a prepared statement that the competitive marketplace is now benefitting consumers.
“Retail price offers in the competitive market have fallen along with wholesale power prices, which tend to respond to low natural gas prices,” Rathgeber said. ‘A mature market’
“Customers in the competitive market have hundreds of products available, like 100 percent renewable power, time-ofuse pricing, loyalty programs and service bundled with smart thermostats. It’s a mature market, and customers continue to benefit from electric choice,” Rathgeber added.
For decades, Houstonarea customers got their electricity from the regulated monopoly Houston Lighting & Power Co., which traced its corporate history to 1882.
As deregulation took effect, HL&P split into Reliant Energy, Texas Genco, a competitive power generator with assets now owned by NRG Energy, and CenterPoint. NRG purchased Reliant in 2009.