Restructured electricity markets

Restructured electricity markets in Texas have encouraged competition that has led to lower electricity prices for residential consumers, according to a new study by the Texas Public Policy Foundation’s Center for Economic Freedom. The study, Prices, Reliability, and Consumer Choice in the Texas Electricity Market, shows that past reliance on U.S. Energy Information Administration (EIA) state-level data has significantly understated the reduction of competitive residential electricity prices with retail restructuring.

Using market data, the study finds that residential electricity rates in Texas have fallen well below the national average since competitive markets were established in 2001. Monopoly rates in now-competitive areas of Texas averaged 9.98 cents per kilowatt hour (kWh) in 2001, which were 15.8 percent above the national average. Today, the average competitive electricity rate of 11.01 cents per kWh is 8.71 percent below the national average, and the average of the 15 lowest offers, 9.27 cent per kWh, is 23.13 below the national average.  Adjusted for inflation, the average competitive price is 9.46 percent below the average 2001 monopoly rate, the average of the 15 lowest prices is 24.39 percent lower, and the lowest average price is 30.5 percent lower – staggering evidence that competition has driven electricity prices lower for consumers.

Hyperbole and half-truths have clouded the picture of Pennsylvania’s expiring rate caps and ignore the fact that retail electric competition has saved that state’s consumers billions, according to a recent op-ed by Jan Jarrett of PennFuture. Scary stories, she says, are becoming urban legends.

Responding to critics who argue consumers should return to monopoly control of electric markets, Jarrett points out that restructured power markets have paid dividends to much of the state. Beyond the fact that state electric rates are now 5 percent lower than the national average (compared to 15 percent above the national average before competition), renewable wind power generation and energy conservation innovations have boomed in Pennsylvania’s organized market –a direct benefit of competition.

Thursday’s Hartford Courant brought good news for electricity consumers: “Many CL&P Customers To See Lower Rates Starting Jan.1” Electric rates will decrease 5.2 percent in January for most of Connecticut Light & Power’s 1.2 million customers, continuing a trend of declining electricity prices in competitive electricity markets as reflected in the state’s declining costs.

The rate reduction is a result of Connecticut’s participation in New England’s wholesale competitive market managed by ISO New England, a regional transmission organization. Consumers who shop for competitive energy suppliers in Connecticut have benefited directly from falling electricity prices in the past year – a trend recently noted by the Federal Energy Regulatory Commission.