The Dallas Morning News
Cleaner and cheaper in Texas
Switch to free market to reduce electricity prices and pollution, says Barry Smitherman
Electric competition in Texas recently passed its 16th anniversary, and our citizens continue to reap the benefits of a market, rather than a government, allocating energy resources and competing for electricity customers.
Recently, the city of Lubbock, the sole electricity provider to city residents, asked to join the competitive market. Moving Texas’ thirdlargest municipal utility, with its 100,000 customers, into the state’s unique electricity market is historic and confirms the virtues of competitive electric markets.
Prior to electric restructuring, for more than 100 years the provision of electricity in the U.S. was by monopoly utility companies inhabiting specific government-sanctioned geographic areas. For example, Texas Utilities provided electricity in Dallas, Fort Worth and much of North Texas, while Houston Lighting & Power provided it in the Houston area.
Retail customers in many parts of Texas can choose which companies they wish to provide them with electricity. As well, wholesale generators of electricity are allowed to make their own choices about which type of fuel to use in producing that electricity, be it nuclear, coal, natural gas, or renewable energy, in response to prevailing market conditions, access to capital, and consumer demand.
The result of transitioning Texas from a monopoly-provisioned, government-dictated electricity policy to one directed by the free market has been a diversification of the energy sources used to produce electricity, a decrease in the price of electricity, and a reduction in carbon dioxide emissions.
Electric Reliability Council of Texas, or ERCOT, which operates the electrical grid and competitive market, has changed its fuel mix for producing electricity. In 2003, the year after Texas began electric competition, fossil fuels (coal and natural gas) produced almost 90 percent of the electricity in ERCOT. In 2017, fossil fuels produced 71 percent (natural gas provided 39 percent, coal provided 32 percent) and the rest came from nuclear, wind and solar.
The decline in the use of coal is attributable to both the increase in wind, (with zero cost for fuel), and the decrease in the price of natural gas, (facilitated by the abundance of gas brought on by the shale revolution.) And Texas led the shale revolution for natural gas more than any other state. According to Texas Railroad Commission data, in 2005, Texas produced about 15 billion cubic feet of natural gas per day. In 2015, Texas produced more than 24 billion cubic feet per day. This significant increase was a direct result of the widespread use of horizontal drilling and hydraulic fracturing.
With success similar to that of natural gas, Texas leads the U.S. in wind energy production. The growth in Texas wind was not the result of some mission to avert climate change or a government directive to reduce fossil fuel use. Texans wanted to create a more diverse portfolio of energy resources while making the grid in the western and Panhandle parts of our state more robust. The landmark Competitive Renewable Energy Zone transmission plan beefed up the grid in the all important, oil-and-gas-rich Midland Basin and provided pathways for delivering West Texas and Panhandle wind power across the state. The transmission line project also extended the Texas electric grid toward Amarillo and Lubbock.
The result of this evolution in Texas, toward natural gas and wind, has been a reduction in energy-related carbon dioxide emissions since 2000. This is particularly impressive considering our population grew 33 percent since 1990 to about 28 million in 2016. Electricity consumption has also grown, rising 28 percent from 2003 to 2017. Even so, according to the Energy Information Administration, Texas’ carbon dioxide emissions from the electric power sector are back to 1998 levels. On a per capita basis, Texas has reduced CO2 emissions by almost 24 percent since 2000, and on a carbon intensity of the economy perspective, Texas has reduced by 36 percent over the same time period.
While deregulation of electric markets has been good for the environment, it has also been good for electricity consumers. In December 2001, the last month prior to restructuring of the Texas electric market, ratepayers in Dallas paid 9.7 cents per kilowatt hour, and those in Houston paid 10.4 per kilowatt hour. Today (16 years after deregulation) even the highest-rated retail electric providers offer rates as low as 8.3 cents per kilowatt hour in Dallas and 9 cents per kilowatt hour in Houston. A recent Retail Energy Supply Association study shows that, since 2008, Texas residential, commercial and residential customers have seen the largest percentage decrease in electric rates compared to electric consumers in other states. And, these low rates include billions in new transmission, distribution, and meter infrastructure built in ERCOT over the last decade or so.
Finally, there may be no better evidence of the virtues of competitive electric markets than the city of Lubbock’s intention to transfer its municipally owned electric utility from the Southwest Power Pool into the ERCOT market. Under this proposal, most electric customers in Lubbock will now have power that is sourced from the competitive wholesale market, and people in Lubbock may eventually be able to choose their own electricity providers. At a meeting on Thursday, the Public Utility Commission gave tentative approval to Lubbock’s request.
Lubbock Mayor Dan Pope filed testimony supporting the move: “I believe in the principles of competition, and there is no question in my mind that the citizens of Lubbock desire to be given the right to freely shop the Texas retail electric market for a provider who can tailor a product that best suits their needs. [Lubbock] ratepayers deserve the same opportunities to have choices for retail electric service that are enjoyed by the majority of Texans.”
The Lubbock Chamber of Commerce echoed these comments when it wrote, “It is a guiding principle ... that competition and consumer choice drive economic growth and prosperity.”
Both the environment and consumers have benefitted from Texas’ competitive electric market; let’s keep the momentum going forward.