NCPA - National Center for Policy Analysis

Texas Should Ignore Calls to Increase Utility Regulation

March 22, 2013

More than a decade ago, Texas' electricity and telecommunications markets began the slow transition to full competition. Today, the markets offer a wide variety of consumer choice at lower prices. The Texas Sunset Advisory Commission's (TSAC) Staff Report on the Public Utility Commission (PUC), the agency that regulates public utilities in Texas, concludes that the electricity market is in need of serious government intervention. However, both markets are operating efficiently and increased government regulation will only raise prices and cause reliability problems, says Bill Peacock, the director of the Center for Economic Freedom at the Texas Public Policy Foundation.

  • The TSAC report recommends quadrupling the PUC's administrative penalty authority to $100,000 per violation per day and authorizing PUC to issue emergency cease-and-desist orders to electricity industry participants.
  • This recommendation should be rejected because increased government intervention will decrease competition and stifle market driven demand innovations.
  • Instead, the PUC's authority to approve mergers and acquisitions and disgorge revenue should be eliminated.

Texas should also eliminate energy subsidies, like the Texas Renewable Portfolio Standard, the Federal Production Tax Credit and Texas' energy efficiency program, which harm reliability, increase costs and reduce consumer welfare.

  • To further enhance the competitiveness of these markets, Texas should reduce local franchise fees to reflect actual costs of managing the public right-of-way for utility companies.
  • Taxes on productions goods that are used to deliver consumer telecommunication services as well as the application of sales tax to taxes and fees on a telephone bill should also be eliminated.

Municipalities share jurisdiction with the PUC in setting the rates for electricity and gas. This overlapping authority causes consumer prices to increase and utility companies to spend large sums of money proving to the PUC that rate increase are justified. Original jurisdiction for municipalities should be eliminated, as should the mandated reimbursement of legal fees for the municipalities in rate cases.

These reforms would make the electricity and telecommunications markets in Texas more competitive and are a stark contrast to the Texas Sunset Advisory Commission's Staff Report. The TSAC recommendations would reduce competition and harm the consumer. They should not be adopted.

Source: Bill Peacock, "A Tale of Two Markets: Telecommunications and Electricity," Texas Public Policy Foundation, March 2013.


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