Texas Celebrates 10 years of Successful Electricity Market Competition

The competitive electricity market in Texas celebrates its 10-year anniversary this month. Texas effectively navigated some growing pains along the way and has matured into arguably the nation’s most successful competitive power market, providing extensive benefits for customers.
 
As Dr. Herman Trabish notes in GreenTechMedia.Com, the market was improbably launched a decade ago in the immediate aftermath of California’s failed initial market design and the bankruptcy of Enron Corp. 
 
But by 2008, “80 percent of Texas registered voters favored a competitive electricity market, and by 2010, 55 percent of residential customers had selected a competitive retail electricity provider or product.  In 2011, for the fifth consecutive year, an independent authority named the Texas market the best in the country,” Dr. Trabish observed. 
 
Renewable energy in Texas grew from 1 percent in 2002 to over 8.5 percent in 2011, Dr. Trabish noted. “Wind grew 10 times over, from 2.6 million megawatt-hours to 26 million megawatt-hours, and with over 10,000 megawatts of installed capacity, Texas led all states”
 
American Wind Energy Association (AWEA) Transmission Policy Manager Michael Goggin explained why wind developers embrace organized competitive markets like the one in Texas. Goggin cited benefits such as:
 
-          A uniform, fair price signal for all of energy resources;
-          Grid operating procedures that make the grid operations more efficient for all users and reduce the discrimination that wind energy producers sometimes face;
-          Fast sub-hourly generator dispatch, fast transmission scheduling and wind energy forecasting;
-          Ancillary services markets to efficiently provide flexibility; and
-          Large load-balancing areas, which are more efficient for accommodating the variability of wind resources
 
As a result, “a disproportionate amount of the wind that has been built in the U.S. has been built in those places that have market structures,” Goggin said. Citing power grid operator studies placing consumer savings and other returns from electricity markets “in the hundreds of millions of dollars per year,” Goggin called the benefits of organized competitive markets “really quite staggering.”
 
Austin-based Green Mountain Energy Co. notes that the booming wind energy industry enabled by the Texas market provided the state with 10,000 jobs as of 2010. And the market is also accommodating solar energy production, amounting to 8.2 million kilowatt hours (kWh) annually in the state, the equivalent of covering seven football fields with solar panels.
 
Donna Nelson, chair of the Public Utility Commission of Texas (PUCT), in recent remarks before the Gulf Coast Power Association, also highlighted the extensive benefits of the Texas market while acknowledging some of the challenges the Texas market has overcome in the past decade, ranging from technical problems at the startup to extreme weather events, unfounded allegations of market manipulation and wide swings in the price of natural gas.
 
Employing an appropriate metaphor, Nelson noted that the Texas market has “changed cowboys a few times, tightened the saddle, we’ve even fallen off the horse, but we got back on the horse, we fine-tuned things, and we moved forward.”
 
As a result, Nelson enumerated the following as among the many benefits that have accrued to the Lone Star State’s electricity consumers:
 
-          Private companies have invested $36.5 billion of at-risk capital in new generation since 1999. This is in contrast to the days of regulation in which ratepayers bore the risk of building new generation;
-          Texas retail customers have benefited from a competitive retail market that receives a top ranking in the Annual Baseline Assessment of Competition in Canada and the U.S.;
-          4 million customers have received advanced meters, and a total of almost 7 million will have advanced meters by the end of 2013; and
-          Texas has more than 10,000 MW of installed wind generating capacity, which is more than any other state and all but a handful of other countries.
 
COMPETE also recognizes the robust competitive market in the Lone Star State and congratulates Texas policy makers for their steadfast dedication to markets. This dedication was instrumental in delivering the wide ranging benefits of competition to the state’s electricity consumers.

Joel Malina | January 26, 2012