WSJ News Exclusive | Texas Electric Bills Were $28 Billion Higher Under Deregulation
By Tom McGinty & Scott Patterson February 24, 2021
Those deregulated Texas residential consumers paid $28 billion more for their power since 2004 than they would have paid at the rates charged to the customers of the state’s traditional utilities, according to the Journal’s analysis of data from the federal Energy Information Administration.
The crisis last week was driven by the power producers. Now that power has largely been restored, attention has turned to retail electric companies, a few of which are hitting consumers with steep bills. Power prices surged to the market price cap of $9,000 a megawatt hour for several days during the crisis, a feature of the state’s system designed to incentivize power plants to supply more juice. Some consumers who chose variable rate power plans from retail power companies are seeing the big bills.
None of this was supposed to happen under deregulation. Backers of competition in the electricity-supply business promised it would lower prices for consumers who could shop around for the best deals, just as they do for cellphone service. The system would be an improvement over monopoly utilities, which have little incentive to innovate and provide better service to customers, supporters of deregulation said.
“If all consumers don’t benefit from this, we will have wasted our time and failed our constituency,” then-state Sen. David Sibley, a key author of the bill to deregulate the market, said when the switch was first unveiled in 1999. “Competition in the electric industry will benefit Texans by reducing monthly rates,” then-Gov. George W. Bush said later that year.
The EIA data shows how much electricity each utility or retail provider sold to residents in a given year and how much customers paid for it. The Journal calculated separate annual statewide rates for utilities and retailers by adding up all of the revenue each type of provider received and dividing it by the kilowatt-hours of electricity it sold.
From 2004 through 2019, the annual rate for electricity from Texas’s traditional utilities was 8% lower, on average, than the nationwide average rate, while the rates of retail providers averaged 13% higher than the nationwide rate, according to the Journal’s analysis.
Tim Morstad, associate state director of AARP Texas and a critic of retail-energy suppliers, said he expects many retail customers to suffer increases in their rates in the near future as the companies price in sky-high power rates seen during the winter blast. Most vulnerable, he said, would be customers of retail energy providers who have signed up for variable-rate plans that rise and fall every month amid fluctuations in market rates.
“The prices are definitely going to increase,” he said. “For those on variable contracts, they’ll feel the pinch sooner.”