TCAP: Deregulated Customers Are Loss Leaders in Lone Star State

It seems counterintuitive, but Texans living in deregulated areas would have saved nearly $25 billion dollars in lower residential electricity bills between 2002 and 2014 had they paid the same average prices during that period as Texans living outside deregulation.

These “lost savings” amount to more than $5,100 for a typical household, according to a report, “Electricity Prices in Texas,” released by the Texas Coalition for Affordable Power (TCAP) on June 8.

Texas implemented its retail electric deregulation law in 2002. Under it, 85 percent of Lone Star State ratepayers – in areas such as Houston and Dallas – can choose among different, competitive electric providers. The remaining 15 percent live and work in areas that remain exempt from the deregulation law, and receive service from a single utility or provider.

Interestingly enough, the new study reveals that average residential electricity prices in deregulated areas remained higher than average prices in areas outside deregulation for every year from 2002 through 2014. However, according to TCAP, the difference between average residential electricity prices inside and outside deregulation has been trending downward since 2011. In percentage terms, the price differential in 2014 was the smallest on record since the beginning of deregulation.

Which is not to say that the differential was less than substantial. According to the researchers, Texans in deregulated areas paid, on average, 12.59 cents per kilowatt- (kWh) for residential electricity in 2014, while the nationwide average was 12.52 cents.

A typical customer living in a deregulated area of the Lone Star State – defined as a ratepayer consuming 1,300 kWh/month of electricity – could have saved approximately $263 in 2014 if he or she instead had paid average prices charged to Texans outside deregulation.

It remains unclear how those average prices compare in 2015 and 2016 because the data for those years has not yet been released by the federal government.

But there is some good news: Despite the historic disparity between average residential prices inside and outside areas of Texas with deregulation, Texans now can find many low-priced individual deals inside deregulated areas that beat prices commonly paid in deregulation-exempt areas. “These comparatively low-cost competitive deals appear to be more numerous in 2016 and 2016 than in previous years,” TCAP comments.

“Folks living in areas of Texas with electric deregulation have paid more for electricity, on average, than Texans living without deregulation — that’s just a historical fact,” commented TCAP Executive Director Jay Doegey. “But it’s also true that the deregulated market is maturing. The good news for folks living in deregulated areas is that if they shop carefully, they can find plenty of individual deals with good prices.”

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