“Fierce” Competition Drives Texas Electricity Costs Down

Dozens of alternative energy suppliers have been attracted to Texas’ competitive electricity market, and the competition between suppliers is creating significant economic benefits for consumers. As market participants compete against each other to provide the best possible service at the lowest cost in order to attract and retain customers, market forces are driving consumer costs down while increasing choice and service offerings, and stimulating innovative technologies.
 
Competition’s downward effect on prices across the state is clearly seen in recent testimony by the Association of Electric Companies of Texas, Inc. (AECT) to the Texas Senate Committee on Business & Commerce. Since 2007, the number of 1-year fixed-price plans has more than doubled from 33 to 69 available plans, the average and lowest 1-year fixed price offers have both dropped around 20 percent, and the lowest offer available in the market has dropped 25 percent – activity labeled “fierce” by AECT.
 
According to AECT, competitive residential electric prices in Texas are below the national average as well as the average of every neighboring state as of July 2010. Furthermore, since restructuring began in December 2001, retail electric price offers have fallen even though energy commodity prices have risen. Oil prices have risen 310 percent, gasoline by 150 percent and natural gas by 52 percent – but competitive retail electric prices have fallen between 12 and 28 percent in the three state utility territories (AEP Texas Central, Oncor and CenterPoint).
 
Additionally, the Electric Reliability Council of Texas’ (ERCOT) 2009 market monitor report found that the average wholesale price for 2009 was 56 percent lower than 2008 and was the lowest annual average price since 2002. Even more, the “all-in” wholesale prices (accounting for the costs of operating reserves, regulation and uplift) for ERCOT in 2009 were the lowest among all the other national organized regional markets.
 
Beyond lowering prices, competition is also empowering consumers to make smart energy use choices through smart meters and time-of-use (TOU) rates. Several million smart meters have been installed across the state, and a recent study commissioned by the Texas Public Utility Commission found them to be 99.96 percent accurate in “measuring and recording electric usage, as well as communicating that information through the respective advanced metering systems for use in customer billing.” 
 
Once smart meters are in place, customers can take advantage of dynamic pricing that scales electric rates up or down throughout the day to match overall demand. Both Reliant Energy and COMPETE member TXU Energy have rolled out TOU plans, and have recorded customer satisfaction with the results. Indeed, reporter Tom Fowler of the Houston Chronicle chronicled his successful participation in a TOU plan, saying the pilot program led him to switch his electricity supplier and become aware of his home’s energy use.
 
As the national economy continues recovering from the recession, competition’s positive effect on energy costs should not be overlooked. Advocates in search of ways to help consumers cope with a down economy should pay heed to the Lone Star state for real results.

Joel Malina | November 4, 2010