In 1999, the Texas Legislature deregulated electric companies in certain areas of Texas, promising that this would lower rates for consumers. However, it appears that this promise was not entirely accurate.
A new report released by the Texas Coalition for Affordable Power has found that consumers living in deregulated electricity areas have paid significantly higher prices over the past decade than those whose electricity is still regulated. According to the report, “Texans living in deregulated electricity areas paid about $22 billion more in the last decade than they would have under a regulated system.”
Read more about the harms of energy deregulation after the jump. The Texas Coalition for Affordable Power's report also found that electricity prices in Texas fell below the national average in 2012 for the first time since deregulation. In deregulated areas, the average price of electricity was 11.75 cents per kilowatt hour, which is lower than the national average of 11.88 cents per kilowatt hour. Despite the drop, deregulated prices remain 19% higher than the average for areas in Texas where electric companies are regulated.
The report also pointed out that “prior to deregulation, Texans had consistently paid lower electricity rates than the national average throughout the 1990s.”
Deregulation has also caused problems with safety and reliability. In some parts of Texas, old plants that produce toxic fumes have been allowed to stand because there is little financial incentive for companies to invest in building new ones. Because of depressed natural gas prices, it has been more profitable for deregulated electric companies to let old plants continue to run, despite the deleterious effects on population health. In addition, consumer complaints have skyrocketed in the decade since deregulation. Only in the past year has the number of complaints started to decrease, though it's still several times higher than it was before deregulation began.
Though consumers are paying more and getting less, that hasn't stopped CEO pay from steadily rising. In 2000, as the Texas Legislature was passing energy deregulation, the average pay for CEOs of major utility companies was $2.7 million. By 2011, that had risen to $7.5 million, a 175 percent increase. In contrast, utility CEO pay in the rest of the United States only rose 150 percent.
Municipal electric companies, like those in San Antonio and Austin, are still regulated. Consumers in those cities pay up to 45 percent less than those in deregulated areas. Municipal utilities also consistently rank highly in terms of reliability. Plus their CEOs still make less than $1 million a year.
The reality of Texas energy providers has proven to be much more complex than what the Legislature promised when it deregulated certain areas in 1999. A more free market has led to richer CEOs while consumers pay higher electric bills and get less reliable service. It's yet another example of how a little regulation can go a long way to provide better quality goods and services for Texans.