Utility deregulation was supposed to lower utility rates in Texas. Instead, Texans have seen rates escalate to 200%-300% since deregulation. A hodgepodge of policies on credit eligibility, credentials for eligibility for deposit waivers for the medical infirm or elderly complicates decision making for many citizens. KWw hour rates quoted by some providers do not always include all the fees charged for electric service. Consumers are penalized for falling below minimum usage amounts on many plans. Customers with poor credit are refused service by companies with the lowest rates.
Even when some Texans "shop around" and find up to "25% savings on rates", they report paying double and triple the amount they paid prior to deregulation. Yes, higher natural gas rates fuel some of the rate hikes. While utility rates have escalated, profits by utility companies have also escalated. Yet when some utility representatives discuss the floating price caps utilized as deregulation was phased in here in Texas, they speak of "losing money". Even though they have had increases in profit and revenue, they speak of the difference between what might have occurred if there had been no floating price caps to help ease in deregulation and the increased profits they made with the price caps as if they were a "loss of income" instead of referring to it more correctly as a difference in the level of increased profit/earnings!
In a news story in today's Houston Chronicle reporters Tom Fowler and Janet Elliott conclude that utility deregulation in Texas is a "failed waste of time" which "fails to slash electric bills."
When Texas lawmakers agreed to open the state's power markets to competition back in 1999, one promise was on the tip of many tongues: lower prices.
"Competition in the electric industry will benefit Texans by reducing monthly rates and offering consumers more choices about the power theyuse," then-Gov. George W. Bush said at the time.
Then-state Sen. David Sibley, who was a key author of the bill, put the promise more bluntly:
"If all consumers don't benefit from this, we will have wasted our time and failed our constituency," he said.
Eight years later, many consumers are calling deregulation just that — a failed waste of time.
"IT'S LIKE THERE IS A PENALTY FOR BEING A TEXAN WHEN IT COMES TO YOUR LIGHT BILL." Mike Coleman
From 2000 to June of this year, the average electric rate in Texas rose 56 percent, more than in all but three states, according to the most recent federal figures.
MUNICIPAL OWNED UTILITIES EXEMPT FROM DEREGULATION CHARGE LOWER RATES THAN DEREGULATED UTILITIES IN TEXAS
Tom Fowler and Janet Elliott illustrate this point with CPS Energy, a city-owned utility whih serves San Antonio. City owned utilities are exempt from deregulation. "
San Antonians must buy their power from just one source: CPS.
Yet being exempt from deregulation has benefited CPS customers, who are paying less for electricity than residential customers in other big Texas cities.
The 25 percent of Texans living in regulated markets generally pay less than consumers in markets such as Houston that have been opened to competition.
For example, Houston residential consumers use an average of 1,130 kilowatt hours a month. Bills for that much power would range from $125.43 to $163.85 based on rates available in Houston at the end of September for a one-year, fixed-rate plan. The average rate in Houston would produce a monthly bill of $142.95.
The same amount of electricity would cost $94.40 from CPS in San Antonio and $105.32 in Austin, also served by a city-owned utility.--Elliott and Fowler
TEXAS HOMEOWNERS LESS SHIELDED FROM FLUCTUATIONS IN NATURAL GAS PRICES THAN RESIDENTS IN OTHER STATES:
But the very structure of Texas' deregulated market exposes customers to the full impact of rising natural gas prices more than in other states, or even in parts of Texas still served by regulated electric companies, municipally owned utilities or electric cooperatives.
Steve Bartley, CPS vice president of government and regulatory relations, told Flowler and Elliott that
CPS historically has had lower rates than investor-owned
utilities in Texas primarily because of the fuel mix it uses to generate electricity. It isn't as exposed to volatile natural gas prices.
"When bills go up, it's typically a function of natural gas prices, and it usually happens all over Texas," Bartley said. "Our bills don't rise as dramatically because we don't use as much natural gas."
HOW RATES WERE SET BEFORE DEREGULATION:
Before deregulation, a utility set prices based on the mix of power plants it used. If half the electricity came from gas-fired plants, one-quarter from nuclear power and one-quarter from coal, the rates would be based on a weighted average of their costs.
Any increase in rates had to be approved by the Texas Public Utility Commission. The process was often contentious and lengthy, but essentially utilities were guaranteed a profit of 11 percent over their operating costs.
The state's electric co-ops and city utilities still follow that model. For example, Austin limits profit to 9 percent, which goes toward other city services.--Fowler and Elloitt
RATES UNDER DEREGULATION:
In parts of the state opened to competition, however, retail electric entities that sell directly to customers don't own their own generating plants and must buy power in the wholesale market.--Fowler and Elloitt
DEREGULATION DID NOT FORCE RATES DOWN WHEn NATURAL GAS PRICES FELL:
Because consumer deregulation was phased in from 2002 through Jan. 1 of this year, some price controls were still in place when gas surged in 2005. The controls allowed electric rate caps to rise when natural gas costs increased, but the PUC said the law did not allow it to force rates down when gas prices fell.--Fowler and Elliott
FLOATING PRICE CAPS PREVENTED SUDDEN RATE SHOCK YET UTILITY COMPANIES CLAIM THEY "LOST MONEY" DUE TO THE CAPS!:
Rebecca Klein, PUC chairwoman told Elliott and Fowler that from 2002 to '04, in Texas, floating price caps prevented the sudden rate shock that other states, including Illinois and Maryland, experienced when their price caps were lifted.
"We've been able to successfully and completely lift price caps without the tumult that other states have had," she said.
Under pressure from lawmakers, the largest retailers, including Reliant and TXU Energy, raised rates more slowly than the law allowed. Fowler and Elliott wrote: TXU estimates it lost about $40 million during 2006 as a result, and Reliant estimates it lost about $120 million.
But electric rates still reached record levels by summer 2006.--Fowler and Elloitt
For the majority of customers in the Houston area who remained on Reliant's base plan that summer, the rate was 16.3 cents per kilowatt hour, up 89 percent from July 2002. In Dallas, TXU customers still on that company's base plan were paying as much as 15.3 cents, an 82 percent increase from 2002.
The rate picture has improved since the highs of 2006, helped mainly by natural gas prices that have stayed below $9 since the 2005 hurricane season.--Fowler and Elloitt
IN OTHER STATES:
Other states have seen rate increases, but most have been smaller than in Texas. And many states have instituted price caps that limit what consumers pay or have taken other action to lessen the pain.
Illinois had price caps in place from 1996 until lifting them in January, after which the state experienced double-digit rate increases in just a few months. The Legislature there just approved $1 billion in residential and business rebates.
Virginia re-regulated parts of its market in response to backlash against price increases that followed when caps were lifted..--Fowler and Elloitt
MULTIPLE VIEWS OF THE "UPSIDE":
Proponents of Deregulation point out that the cost for construction of powerplants, under Deregulation, is passed to the stockholders. Critics fear that energy markets are more subject to price manipulation by private corporations delaying construction of necessary power faciities or keeping existing ones off line.
Competition is supposed to produce options and give consumers more choices. Critics point out that a variety of corporate policies among providors makes it more complicated for consumers to understand the options and make informed decisions.
In today's volatile energy market, consumers are granted discounts usually only when signing long-term contracts with their electric providor. Current PUC rules in Texas does not force providors to pass along savings to consumers when natural gas prices drop. In desperation, some cash strapped Texans feel forced into signing contracts with penalities for switching in order to get small discounts off their electric bills yet if natural gas prices drop more than the discount they are receiving, there are no laws to force the electric companies to pass some of the savings on to the oonsumer.
MY PERSONAL EXPERIENCE:
I personally experienced this last month. I was forced to move suddenly due to my apartment complex failing to meet city code standards. The complex where I lived had commercial rate metered service. My utility bill was paid to the complex each month and no credit history shows on my credit report for the six years I lived there. I entered into the world of "deregulated" utilities after six years of not dealing directly with utility companies. I used the PUC website. Those showing the best rates were inaccessible to me. They either required a utility history or did not serve this area. The remainder of companies were unable to connect the electricity on short notice. Only TXU could connect the service within three days.
I discoved that the rates set by most companies penalize customers who use less than 1000 Kww a month. Some penalize those who use less than 500 Kww a month. (My usage in my previous apartment ranged from 500 to 700 kww a month. I hoped to become more conservative.)
My order was placed online and I submitted information that I have medical life support equipment and am medically disabled on Social Security. I was astonished to learn that the waiver for the $250.00 deposit enacted by the Texas Legislature did not apply to me. Victims of domestic violence and people on Social Security over age 62 are granted waivers by most companies. However, only a few providors waive the deposit for medically diabled under retirement age. Improperly I assumed that certification by Social Security that I am medically disabled would be sufficient. No! TXU requires a letter from a physician stating that you cannot perform three or more daily tasks. They refuse to honor the more extensive medical review process by Social Security. What I found especially obscene by this requirement is that TXU requires persons who are deserving of financial assistance in the form of a waiver of the deposit who have already been certifed by a very extensive medical review process through the Social Security Disability Insurance department of the Federal Government to pay for a visit to a physician to get a letter to qualify them for a waiver of the deposit!
NOTICE FOR DISCONNECTION OF SERVICE TO THOSE ON LIFE SUPPORT IS INSUFFICIENT!
Another disconcerting tidbit I uncovered about TXU's policy regarding disconnection of service to persons with life support equipment is that, according to a TXU Customer Service rep, they are only required to notify the customer by US Mail of their intention of disconnecting service. Persons with life support equipment are not phoned or provided notices on the door prior to disconnection of service for a variety of reasons! It became obvious to me that there are more than a few "life threatening" issues which need to be addressed by the Texas Legislature regarding standardization of utility company administrative practices for the handicapped, elderly, or dependent on life support equipment!