Study: Texas residential rates cheaper in some competitive areas compared to non-competitive zones

Dive Brief:

  • A new report from the Center for Energy Studies finds rates paid by electric customers in competitive areas of Texas are about the same, and sometimes lower, than those in noncompetitive zones.
  • The findings are not quite as dramatic as originally reported: Energy Choice Matters reports an editing mistake originally sent the report out concluding competitive rates were lower on average across the state.
  • The report does indicate markets appear to be working as expected, finding "all competitive areas prices declined from 2002 to 2016, but they increased in non-competitive areas over the same time period."  

Dive Insight:

It was just one word"some"but the omission briefly painted a much rosier picture of Texas' competitive markets. 

One of the study's authors, Kenneth Medlock III, Ph.D., at the James A. Baker III Institute for Public Policy at Rice University, told ECM that the report should have read, "by 2016, the average price paid by residential customers in SOME competitive market areas was lower than the average price paid in non-competitive market areas."

Medlock told ECM the missing "some" should have been caught in editing.

But the other findings stand, including that that residential rates in competitive and non-competitive areas of Texas "have behaved in a manner that is consistent with economic theory." The report goes on to say that "more specifically, residential rates in competitive areas are highly reflective of wholesale rates, which suggests that electricity providers are minimizing costs in meeting market demands." You can find the report here. 

Texas lawmakers deregulated markets in 1999, and consumer choice launched in 2002. A five-year transition period followed, with some price control to incentivize market entry. While the markets are now competitive, the CES study balks at calling it "deregulation."

"'Deregulation' of electricity markets is better characterized as market reform that brings about a shift in regulatory approach associated with a change in market structure away from vertically integrated monopoly utilities," the authors write. 

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Filed Under: Generation Transmission & Distribution Regulation & Policy