NCPA - National Center for Policy Analysis

ENERGY DEREGULATION IN TEXAS

February 7, 2006

Texas consumers are paying less for electricity than they would have if the market were highly regulated, according to the Public Utility Commission of Texas.

The state agency reviewed the market in response to a legislative inquiry from state Rep. Sylvester Turner (D-Houston), who wanted to know if the deregulated electric market has benefited consumers.

Lawmakers deregulated electric markets in 2002, letting customers in many parts of the state choose their retail electric provider. According to PUC researchers:

  • A residential customer in Houston who switched to a competitive retail electric provider four years ago and then switched each following year to the lowest-cost provider would have saved about $1,450, compared to the estimated regulated rate; a similar customer in Dallas would have saved about $800.
  • Also, for each of the past four years, the average price of the five lowest competitive prices in the Houston and Dallas markets was lower than the estimated regulated price there for each year.

The prices used were average yearly prices for residential customers using 1,000 kilowatt hours a month.

"You would still have saved money even if you stayed with one of the lower, if not the lowest cost providers," said Terry Hadley, spokesman for the commission.

The researchers also countered consumer arguments that electricity rates in deregulated parts of Texas are higher than regulated markets in other parts of the country.

Rates are higher here, they said, because more power generators in the state rely more on natural gas than other fuels to generate electricity. Thus, companies here generally have been forced to account for rising natural gas prices.

Source: Purva Patel, "PUC study praises deregulation: Report says consumers benefit from competition in electricity," Houston Chronicle, February 3, 2006.

 

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