NCPA - National Center for Policy Analysis


April 4, 2008

Deregulation was widely blamed for causing California's power crisis, but its electricity market was never really deregulated, says Bill Peacock, director for the Center for Economic Freedom.  A poorly designed set of wholesale regulations combined with retail price controls led to that market's collapse when natural gas prices skyrocketed.

The only things that have skyrocketed in Texas since full deregulation took effect in January 2007 are consumer choice and competition, says Peacock:

  • In September 2006, an average Texas consumer in an area open to electric competition had access to about 17 retail electric providers with 36 different rate plans.
  • Today, those consumers average 28 providers and nearly 100 rate plans.

Consumers can lock in today's rate for the long term or let it float month-to-month.  They can pick providers and rate plans based on fuel sources.  They can choose electric providers that will give them a commission for each household they recruit to the company.

Since competition began:

  • The five former monopoly electric providers have lost between 53 and 78 percent of market share.
  • As of December, 72 percent of residential consumers had chosen a competitive rate plan, and 80 percent had made an observable choice of providers.
  • The remaining 20 percent of the market can choose a new plan at any time.

Competition in the wholesale market has led to the construction of more than $20 billion in new generation facilities in Texas since wholesale deregulation began in the 1990s.  An additional $25 billion is under construction or planned.

The reliability resulting from these massive investments testifies to the success of deregulation, as Texans have been spared the rolling blackouts of California and New York, says Peacock.

Source: Bill Peacock, "Numbers Show Deregulation Works, "Dallas Morning News," April 2, 2008; and Bill Peacock, "Texas Electric Meter: Measuring the Effects of Electricity Deregulation," Texas Public Policy Foundation, March 2008.

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