Posted on 03/20/2006 3:00:56 PM PST by B-Chan
AUSTIN - Under electricity deregulation, Texans have paid some of the highest rates in the nation -- a reversal of at least a decade of relatively cheap electricity under the state's old regulated system.
That's the conclusion of a national utility expert, who also reports that those in deregulated states typically have had larger rate increases than customers in states still under regulation. Separate academic reports likewise show, after making adjustments for inflation and other factors, that electricity prices in Texas have gone up since 1996, while those in regulated states have gone down; and that in general terms, electricity prices in the United States have not fallen under competition.
"Deregulation isn't working in the way that most people had hoped," said Kenneth Rose, a senior fellow at Michigan State University who did the study for Virginia regulators. "Evidence that we're gathering -- at least as we had originally thought it would work -- is not bearing out from the customer perspective."
The studies are made possible because some states have opted to end regulation while others have maintained it. In effect, this mix of markets has allowed experts to make head-to-head comparisons that help answer a basic question: Is deregulation saving money for consumers?
And the growing academic consensus, said Rose, is no.
For his report, Rose took nationwide utility data from the U.S. Energy Department and calculated pricing trends for different states. His analysis shows that from 1990 through 2000, Texans paid less than the national average for electricity.
Then in 2001, as the Public Utility Commission began allowing utilities to keep excess earnings in preparation for deregulation, Texans paid roughly $89 per month for electricity. That was about 3.2 percent higher than the national average of $86.20.
In 2002, the first year of deregulation in Texas, rates dipped below the national average -- as a 6 percent rate cut was mandated that year by the Texas Legislature.
In 2004, the typical Texas residential customer paid an average of $96.00 per month, compared with the national average of $89.40.
The available data for Rose's analysis go only through 2004, although the he said initial information from 2005 indicates that the pricing gap between regulated and unregulated areas continues.
That would fall in line with another recent review conducted by the Office of Public Utility Counsel -- a separate agency from the PUC -- that indicates that Texans, on average, paid the 11th highest rates in the nation in 2005.
Clarence Johnson, an analyst with the office, said utilities are also increasing rates this year.
Utility experts have posited several reasons for what at least three researchers have termed the "failure of U.S. electricity restructuring."
For instance, Seth Blumstock and Jay Apt, in a report prepared for the Carnegie Mellon Electricity Industry Center, note that the U.S. transmission system was not designed to handle the volume of transactions needed under deregulation; that several new institutions required under deregulation have resulted in higher industry costs; and that increased market uncertainty under deregulation has increased capital costs.
But that conclusion and others are rejected by TXU spokesman Chris Schein, who says Texas is on the right track. He said a recent study by the Public Utility Commission has found evidence of savings under the state's deregulation law, and that Rose, in his August report, did not specifically examine the features of the Texas market.
"The PUC has already done the analysis, and if we were [still] in regulation, we would have seen more [price] increases," he said.
He said that even if average residential rates are higher in Texas, that doesn't mean that consumers cannot shop around for better deals. Comparing Texas to other markets is like comparing "apples to tires," he said.
Other researchers have examined the effect of deregulation nationwide:
MIT professor Paul Joskow, in an August report, found that residential prices in states without retail competition declined about 8 percent between 1996 and 2004. By contrast, under the same conditions, rates in Texas have increased about 2.5 percent over the same period.
Blumstock and Apt, in their Carnegie Mellon report, state that "our research shows that there is no evidence that restructuring has produced any measurable benefit to consumers or to the systems that have restructured."
Rose, in his report for Virginia regulators, lists Texas and 15 other states with full retail deregulation, meaning residential and business customers can choose their suppliers. Two states, Oregon and Nevada, have partial retail deregulation that allow only large commercial customers to choose.
He also said that several states, most notably California and Montana, are trying to "put the genie back into the bottle" by going back to regulation.
That's impossible for most states because their electricity systems are interconnected. When they moved to deregulation, key portions of their system came under the jurisdiction of the Federal Energy Regulatory Commission.
Texas has a separate electric grid, so it "has that [re-regulation] option more available," Rose said.
$108.40: The average utility bill for a typical Texan.
$94.80: The average utility bill for a typical electricity consumer in the United States.
40th: The ranking of Texas among the 50 states and Washington, D.C., on the affordability of electricity.
SOURCE: Office of public utility counsel, based on 2005 figures
Part of Texas's problem is the ERCOT grid. Very expensive.
I don't take Fort Worth Star Telegram but I'll bet their rates have gone up in the last ten years. Who's investigating that scandal?
Really? Then I'm well above average.
Well, Texans don't typically have rolling blackouts either. Those states with regulated utilities typically have to get some of their electricity from states like Texas.
Apples and oranges. One does not need a subscription to the Startlegram to live.
There was a good reason the electric utilities used to be regulated. It was called "the public interest". The traditional Christian term was "commonweal". You should look it up.
"Really? Then I'm well above average."
Yeah, I'd take $94.80 in a heartbeat.
Typically? Out of all 50 states, how many regulate electricity rates and are forced to buy power from Texas? 2? 12? 24?
You claim that the deregulation of electric utilities in Texas is connected to the lack of blackouts here. Please post some support for this contention.
Got any evidence? Any numbers? I posted hard data in my article. I have yet to see any evidence posted in refutation of these data.
I'm not claiming the deregulation of electric utilities is connected to the lack of blackouts. I merely pointed out that Texas is a provider of electricity to many other states that have regulated their utilities, some of which have experienced some rather widely publicized rolling blackouts (or Gray-outs in one rather infamous example).
As for the hard data, yes rates have gone up, but they were going up every year before regulation as well. I haven't looked at the source behind this story in the Startlegram, but it sounds like the study was conducted by an organization that might have an agenda.
Nor does one need electricity to live. It is convenient but not necessary. Maybe the state should just find out what the poorest person can pay for electricity and set the rate at that. Some would consider that to be "in the public interest."
He said a recent study by the Public Utility Commission has found evidence of savings under the state's deregulation law, and that Rose, in his August report, did not specifically examine the features of the Texas market.From the article itself, there is a claim that Rose's study did not specifically examine the features of the Texas market, thereby implying that the analysis is flawed at best.
And there is also a good reason for deregulating; it is called production efficiency and competition. It almost always leads to better quality, higher production, and more consumer choice.
The basic differences between you and I:
1. You prefer an efficient society to a Christian society.
2. I post data to support my claims.
I'm still waiting to see some data in refutation of the data I posted. Any data. Any data at all.
Does anyone know long it took for this whole telephone thing to shake out?
25 years or so?
The "data" you posted is meaningless. The "average utility bill" figures don't give the KWH purchased for that amount. If you post that it would help. I am not aware of any evidence that electricity has a religious preference.
You implied without evidence that some states have a shortage of electric power due to utility rate regulation. If so, then please tell us: how many states does Texas supply with electricity? Are all of the importing states regulators of electic utility rates? If not, what percentage are? And what linkage, if any, is there between Texas' deregulation of rates and its provenance of electric power to other states? I see no answers to these questions in anything posted so far.
As for the hard data, yes rates have gone up, but they were going up every year before regulation as well.
Evidence? Please cite.
I haven't looked at the source behind this story in the Startlegram, but it sounds like the study was conducted by an organization that might have an agenda.
The basic data used in the study cited in the article I posted came from the State of Texas. I see no reason to doubt the accuracy of the facts cited in the story based upon their source.
Every organization, from the U.S. government on down, has an agenda. Objectivity is a myth. The best that a thinking person can do is to examine the evidence from all sources, judge each source for its trustworthiness, and make a decision as to whose biased version of the truth is likely to be closest to reality.
Until I see evidence refuting the data cited in the story, I have to come down on the side of the article's author. Again: if anyone has better evidence, please post it. Otherwise, the claim stands.
Often regulators do not work in the public interest, but serve the interests of the reigning party. Further, many utility companies engage in rent-seeking by deliberately raising the regulatory burden. Also, the "public interest" or "commonweal" is not necessarily best served by the lowest possible retail price for power. What would be the incentive for additional capital investment under such a regulatory regime?
Without further evidence, I'd say the jury's still out on this one.
Electricity has no moral preferences. It goes where it is sent. As human beings, however, we may choose to create a society in any way we wish. We may choose to create a society in which every person is considered a free and autonomous being deserving only of that which he or she can obtain in return for labor. This is the liberal view. Another conception of society is that in which people are considered to be deserving of certain basic goods and services for no other reason than their status as fellow children of God. This is the Conservative view.
There are shadings within each camp. Some conservative people consider electric power to be one of the basic services to which all men are enttled. Others would limit those things to which all people are entitled to food and water. All, however, would agree that people with no money for food or shelter should not simply be left to starve in a ditch. The idea that no one deserves anything for which they cannot pay -- that man is primarily an economic being -- is a liberal idea, not conservative.
The only real political question is: what kind of society do we choose to create? I know where I stand. I stand with the traditional and conservative Christian conception of society, i.e. a society in which every human being is considered to be deserving of certain basic goods and services for no other reason than their status as divinely-created human beings. If you stand elsewhere, I pity you, but I will not attempt to change your mind -- for what is needed is not a change of mind, but of heart. Only God can do that.
Thanks.
Deserving? OK if you can afford it go ahead. Adding "divinely-created" doesn't change it from communism.
Where do you stand on regulating the cost of oil, gas, and coal?
I live in Dallas in a 2700-square foot historic house with the best insulation I can provide, given my budget and the style of home. I keep the thermostat on 78-80 in the summer and turn out lights when I leave the room. My averaged monthly bill runs $240, and that's at a half-price discount rate I got for switching to Direct Energy. Next month, that runs out and it's set to DOUBLE! So I'd like to see the phone booth that the average Texan must live in to have a $98 monthly electricity bill.
This article is severely retarded.
The truth is that Texans can still buy electricity at either the "regulated rate" or from any of the competition.
Stupid Texans still buy at the regulated rate. Smart ones do some shopping and undercut that rate by up to 20%.
Comparing average electric bills nationwide is foolish. Texans USE more electricity, especially in the summer when it's so dang hot. If natural gas prices spike in the summer, it's going to be reflected in power bills.
But here's the kicker and the proof how retarded this story is.
The overwhelming majority of Texans are still paying the regulated price. Probably 80% or more.
If anything, this story proves the opposite of what was intended.
Here's a chart showing the cost/kWh by state. Compare Texas to California or New York.
Here's the link:
http://www.eia.doe.gov/cneaf/electricity/epa/fig7p4.html
Rates went up in Texas due to the lack of power plants being built, IMO.
I feel the same way. But the real question is how these goods and services should be delivered. Your support of regulation leads me to believe you think the government should play a significant role; I believe it should be left to the private sector. Charities can help those unable to help themselves.
Unless I misunderstand you, it sounds as though you're little more than a big government liberal disguised as a Christian conservative.
Rates went up in Texas because the fuel for the power plants, mostly natural gas, went up in price from $3 to about $13 per mcf.
Natural gas prices have dropped recently, but they're still over $7 per mcf.
Shoulda built some nukes down here.
That's not really true. Thanks to the media hysteria over the California power crisis a few years ago, Texas companies were overwhelmingly blamed for soaring rates in California.
What it misses is the fact that those companies had plants in California and merely a headquarters in Texas.
The Texas power grid is largely isolated from the rest of the country and is unique in that regard. Texas doesn't even have the ability to export electricity to other states except in very small quantities. The interconnect isn't there.
That chart is out of date: where I live at least, in Dallas, we have to pay 14-16 cents a kwh. You can search the available rates at any Texas zip code at http://www.powertochoose.org/
Deregulation +10 Years: [Your title edit]
Well, we did. And I got one of the last tours of the South Texas Project before 9/11. Today, the Visitors Center is abandoned and overgrown.
That, and Comanche Peak, are still owned by the "regulated" power companies in Texas, at least in part. And they're producing power at the lowest KWH cost in the state.
The problem is that they cost so much to build, largely for bureaucratic and unnecessary reasons. Neither of the plants were actually expected to pay for themselves over their entire lifetime, although that might have now changed with rising fuel costs for other power plants.
We need more nukes. But we also need to build them smarter in a new, deregulated market environment. They need to be a profitable investment instead of a sunk cost which can be passed along to customers who formerly had no choice of whom to buy power from.
The overwhelming majority of Texans are still paying the regulated price. Probably 80% or more.
1. You prefer an efficient society to a Christian society.
2. I post data to support my claims.
With all due respect, what do you consider to be the tenets of a "Christian" society? While your sentiments look good on the surface, underneath the surface it would appear to be the age-old "communal ownership" system which has failed again and again. Jamestown 1604, Plymouth 1620, Soviet Russia in this past century. Every time "communal ownership," even for the purpose of helping the so-called needy, has failed. Why do you suppose that is?
Re: #2, sadly, in the information age we live in, one can readily find "facts" to support any given position. All that's required is ignoring anything the other side claims, and carefully choosing which sources you select to quote from. I would humbly suggest that your sentiment that you post "data" to support your claims is not as high a moral ground as you wish it to be.
In any case, I don't wish any ill towards you, I'm just trying to get to the bottom of what you're saying. As a Virginian, I tend to take a more negative view of centralist sentiments, as I've consistently seen (and our Commonwealth has a 400-year history to learn from) that such sentiments never end well.
Warmest regards from a fellow Dominionist,
~dt~
I'm not a dominionist. I'm a monarchist.
I would also remark that these estimations of "increasing costs" could potentially overlook two basic factors—INFLATION, wherein our money becomes less valuable each year—, and COST OF PRODUCTION, the assorted costs which combine to create the "energy rate."
Production consists of the price it takes to extract crude, natural gas, nuclear power, or other energy sources; combined with the cost to refine/enrich/etc. said fuel supply; combined with the cost of transporting said refined material to the power-generating stations; combined with the cost of actually producing said power.
On top of that, there are dramatic differences in "average housing" from 1970 through now. The average square-footage of your average house has increased substantially in the past 30 years, and along with this increase COMES HIGHER COSTS. Add to that high-energy items (televisions, washer/dryers, dishwashers, etc.) which have become far more commonplace during the same period.
I think, once these factors are combined, it really isn't surprising that we're paying more. The question then becomes, as a percentage of INCOME, how do we stack up over the past 30 years?
(I'll spare you from a detailed analysis of the situation as it existed in the centrally-regulated system, but suffice to say that estimates which only consider the end-user fee for such systems are completely overlooking the largest cost in the system—TAXES—which were still paid by every consumer!)
Hi deport. I hadn't heard about that Gulf State Utilities fiasco.
Under the old regulated environment, utilities were actually rewarded to some extent for spending too much money on new nukes, because the construction costs were factored into their rate requests.
The more they spent, the more they were allowed to charge in attempt to recoup the costs. It didn't matter if the plant itself could produce power cheaply. It mattered what rate of return they were able to charge in an effort to justify it.
But when costs got too high, and most of them were imposed on the utilities, it became impossible to justify them as an investment. The whole thing became driven entirely by politics and bureaucracy, and not based at all on real-life economic decisions free of those constraints.
We're going to have to ramp up nuclear power plants significantly over the next 75 years just to meet our own energy needs. It's going to be impossible to import 120% of all the world's production of oil and gas to meet them.
The free market will work this out for us. We just need to let it have a chance.
And I, Sir, am an adherent of Christ's Dominion. I assumed the same of you, please do forgive me if I did so in error.
Regards,
~dt~
It is a shame that in Texas, where the economy is not that great, people are struggling to afford lights and the air conditioning (set at 80 degrees) to live in this hellhole in the summers. There is no competition in the vast rural areas of Texas, only in the metropolitan areas. At least I'm glad to see articles like this because this may make the fat cats aware that the sheeple are getting tired of being fleeced. That Mean Grandma or Kinky could get a few votes by hitting on this issue of too-high energy costs in a state that sells cheap energy to everyone else.
Without looking at other replies, the "stand alone" Texas grid and hot summers are the reasons for high prices. If the rest of the country goes dark, we still have power.
Until you post some $ per KWH, you're just blowing smoke. And trying to tell us you're not.
The lack of KWH raises a big flag.
I suspect an agenda.
Really? What zip code do you live in? I will then be able to give you a list of electric companies that you can select to provide you power at a fixed rate.
Of course, you could do this yourself without my help.
You have liberal and conservative mixed up. Conservatives view the individual as free and autonomous, "deserving" of that for which they are willing and able to pay, free to use the fruits of their labor as they please. Liberals are the ones that consider people to be entitled to basic goods and services without consideration of their ability or willingness to pay for them (or as you phrased it "for no other reason than their status as fellow children of God"). Sorry, but your marxist brand of Christianity and "conservatism" won't fly around here.
Since the end of the eighteenth century... the word ["liberal"] has been applied more and more to certain tendencies in the intellectual, religious, political, and economical life, which implied a partial or total emancipation of man ["liberty"] from the supernatural, moral, and Divine order. Usually, the principles of 1789, that is of the French Revolution, are considered as the Magna Charta of this new form of Liberalism. The most fundamental principle asserts an absolute and unrestrained freedom of thought, religion, conscience, creed, speech, press, and politics. The necessary consequences of this are, on the one hand, the abolition of the Divine right and of every kind of authority derived from God; the relegation of religion from the public life into the private domain of one's individual conscience; the absolute ignoring of Christianity and the Church as public, legal, and social institutions; on the other hand, the putting into practice of the absolute autonomy of every man and citizen, along all lines of human activity, and the concentration of all public authority in one "sovereignty of the people". This sovereignty of the people in all branches of public life as legislation, administration, and jurisdiction, is to be exercised in the name and by order of all the citizens, in such a way, that all should have share in and a control over it. A fundamental principle of Liberalism is the proposition: "It is contrary to the natural, innate, and inalienable right and liberty and dignity of man, to subject himself to an authority, the root, rule, measure, and sanction of which is not in himself". This principle implies the denial of all true authority; for authority necessarily presupposes a power outside and above man to bind him morally. [Source]Thus we see that Liberalism is a secular school of thought that holds the individual as sovereign, free, and supreme. The "conservatism" touted today is nothing more than revolutionary, atomistic, humanistic Liberalism in a business suit and tie. Sorry to disillusion you.
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